Corporates and other entities in the Middle East have increasingly turned to Islamic structures for their financing needs, observes Samer Eido, a partner for banking and finance, Middle East at Allen & Overy, in this latest episode of the IFN Podcast. NESSREEN TAMANO writes.
Particularly in the GCC region, Islamic finance is always top-of-mind for borrowers. “They tap into Islamic finance on a regular basis, and it’s not always a faith-based preference. There are many entities that are not particularly Shariah compliant for instance that tap into this market as an attractive option high in liquidity and competitive prices,” Samer explains.
Certainly there are challenges and a learning curve, and when it comes to newcomers, their biggest concerns usually revolve around understanding Islamic concepts and structures and how risks are mitigated. Samer sees this as a positive: the more interest the Islamic finance sector garners, the more it can naturally evolve to becoming more easily accessible.
A popular option for borrowers in the region is the Islamic syndicated financing facility. “It is very common to have dual-tranche financing agreements (featuring a conventional and an Islamic tranche). This is a rising trend due to the fact that there are big pockets of liquidity (in Shariah financing) that they’d like to tap into and they don’t want to have to choose,” Samer notes.
In general, things are looking up in the industry. “The Islamic finance market has no doubt expanded in the past few years and has evolved ‘naturally’, so to speak, which in itself is an achievement given that not all Muslim jurisdictions practice it. Accessibility and regulatory support are important to keep the momentum,” Samer says.
This is an excerpt of an exclusive interview with Samer Eido, a partner for banking and finance, Middle East at Allen & Overy, on trends in the MENA region, particularly in Islamic syndicated financing. For the full discussion, log on to IFN Podcast.