Malaysia's central bank has launched the first regular issue of Islamic leasing securities meant to attract Middle Eastern investors who have claimed that previous Malaysian Islamic debt instruments did not fully conform with sharia law.
Malaysia, which is seeking to become a global hub for Islamic finance, said the sale of the new Islamic debt securities would be based on the ijarah or leasing principle.
The first issue, scheduled for February 16, will be a M$400m, one-year bond. Subsequent issues will be for up to three years each, with the central bank setting aside M$500m-M$600m as assets for the securities.
The central bank said the ijarah securities would serve as a benchmark for other short to medium-term Islamic bonds.
A special purpose vehicle will issue the ijarah bonds, with the proceeds used to buy assets that will be leased to the central bank.
Rental payments will be distributed to investors as returns twice a year. The special purpose vehicle will sell the assets back to the central bank once the ijarah bonds mature, which will coincide with the end of the lease period.—FT Syndication Service