Saudi Arabia’s Ministry of Finance raised 17 billion riyals ($4.5 billion) in its first domestic sukuk issuance in late July. Analysts at Moody’s Investors Service Middle East in Dubai say the issuance is credit positive for Saudi banks because their profitability will benefit from the transfer of their large, low-yielding reserves of cash and placements from the Saudi Arabian Monetary Authority and other banks to higher-yielding government Islamic bonds.
In addition, Moody’s says, the issuance will help address a shortage of shariah-compliant liquidity-management instruments for Islamic banks and support the development of a domestic sukuk market by establishing a yield curve. The finance ministry said 13 domestic banks had qualified to participate in the program for local currency Islamic bonds.
Alinma Bank assisted with structuring the sukuk. The kingdom issued its first international sukuk of $9 billion in April.