It met its target of raising 100 million euros, but has not issued another sukuk since.
It has more listed sukuk, which are bond-like investment certificates based on Islamic principles, than anywhere else.
However, the concerns raised by Usmani over the permissibility of sukuk almost certainly played a role.
Certainly this ruling seems to have had a significant effect on the sukuk market.
Last year the first sukuk from Africa was issued by a Sudanese cement firm.
The Dubai debt now in default just happens to be Shariah-compliant bonds or sukuk.
His government has said it intends to issue its own sukuk (or "Shariah-compliant" bonds) sometime next year.
Dubai will probably make timely payment on any of the bonds or sukuk that trade on public markets.
Usmani's objection would seem to make it impossible to remedy--that is, Islamify--the massive number of already issued sukuk.
This is largely the premise upon which the instrument known as the sukuk, or the Islamic bond, operates.
The German state of Lower Saxony issued its own sukuk bond back in 2004--the first European government to do so.
But Dubai had led investors to expect that publicly traded instruments, such as sukuk, or Islamic bonds, would be honoured.
The instruments may seem opaque, but many sukuk issues are now listed on the London Stock Exchange, making access and acceptance easier.
Malaysia issued the first sovereign sukuk in 2002, and made a point of appointing Sharia scholars from the Gulf to monitor compliance.
Japan wants to be the first nation in the G-7 to issue a sovereign sukuk bond--that is, if Britain doesn't get there first.
It is hard to see how this could appeal to large numbers of investors who currently view the sukuk as a bond equivalent.
London is already enjoying some success as a focal point for international Sharia-compliant investors, with both corporations and countries listing sukuk bonds in Britain.
For business borrowings--excuse us, financings--there is the sukuk, an asset-backed security.
Last Monday, as I was writing my article on Sukuk called An Islamic Solution To U.S. Debt Problems, I was very unhappy with the situation.
Recently, a premier Islamic finance scholar, Mohammed Taqi Usmani, declared some aspects of sukuk to be un-Islamic, specifically the buyback at cost and the interest-free non-recourse loans.
The investor holding the sukuk is not exactly collecting interest.
But in Egypt, which is now ruled by the Muslim Brotherhood, the parliament is playing word games in its quest for a law mandating sukuk market in the country.
Bankers from the Gulf hope that the middle class, particularly in the Muslim north, will turn to Islamic finance, and that firms will raise money through Islamic bonds, known as sukuk.
The governments of Japan and Great Britain--whether in an attempt to lure Muslim investors or impress Muslim voters--have announced plans to issue sukuk, which behave like bonds but conform to Islamic law.
Bonds can play a key role in helping countries deal with the global economic crisis, but the global sukuk market has fallen for two years in a row, in step with the global downturn.
So, for example, a sukuk issuer does not sell a debt, as a traditional bond issuer would, but rather sells a portion of an asset, on which the buyer is then entitled to receive rent.
This is because any remedy would require that the sukuk be changed so that the sukuk holder shoulders a risk of loss, or of lower return, in years where the venture did not meet earnings expectations.
The new Sukuk law will be approved on Wednesday by the cabinet before being referred to the Shura Council on the same day, said Ahmed El-Najjar, member of the economic committee at the Freedom and Justice Party (FJP) and advisor to the minister of finance.
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