Demand for Islamic bonds issued by the International Islamic Liquidity Management Corp (IILM) is growing, signaling widening popularity for a programme designed as a cross-border tool for Islamic banks to manage their liquidity needs.
The Kuala Lumpur-based body is a likely beneficiary of a decision by Malaysia’s central bank to wind down its own sales of sukuk, which could in turn spur the IILM to expand its $3 billion issuance programme.
A boost in demand could help widen the membership base of the IILM and encourage regulators across Asia and the Middle East to approve the use of IILM sukuk by their Islamic banks.
On Wednesday, the IILM sold $860 million worth of three-month sukuk attracting $1.7 billion in bids, bringing the total amount of IILM sukuk outstanding to $2.7 billion, according to regulatory filings.
This is above bids received for previous auctions for IILM sukuk of similar size and tenor: Auctions in April of this year and in July of last year drew $1.1 billion worth of bids each.
Demand has also increased for six-month tenors of IILM sukuk. A $500 million deal in May attracted $1.1 billion in bids, compared with a $400 million auction in August that attracted $652 million in bids.
The IILM, a consortium of central banks from Asia, the Middle East and Africa, began issuing sukuk in August of 2013 under an issuance programme which permits maturities of up to one year.
Since then, the IILM has sought to widen its membership although it has yet to attract any new shareholders, while in October it added Qatar’s Barwa Bank as its tenth primary dealer to handle its sukuk programme.
Growing popularity of IILM sukuk coud also improve its secondary market activity.