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HK eyes raising funds via Islamic bonds
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Hong Kong may present a bill to lawmakers in the first quarter of next year to allow the government to raise funds via Islamic bonds, according to a discussion paper from the city’s Legislative Council.
The plans come at a time of increasing competition among financial centers for a slice of Islamic finance business, which is centered in southeast Asia and the Middle East.
Hong Kong’s schedule could see it leapfrog Britain in issuing a debut sukuk; Prime Minister David Cameron said last month that the first British sovereign sukuk was expected “as early as next year.”
The discussion paper will be reviewed by the council on Monday, a Hong Kong Treasury spokeswoman said. No details of the likely size or timing of a government sukuk were given.
The bill would allow the AAA-rated government to issue sukuk under its existing government bond program, which has so far issued HK$107.5 billion (US$13.9 billion), of which HK$90 billion was outstanding as of November 15.
The paper calls for legislative amendments to allow the use of special purpose vehicles; such vehicles are often required for sukuk, which are investment certificates that follow religious guidelines such as bans on interest and gambling.
In July, Hong Kong passed a bill to facilitate issuance of sukuk in the market, helping clarify their tax status. Sukuk can face heavy tax because they involve multiple transfers of the assets backing them.
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