Bank Negara Malaysia is pleased to announce the introduction of a new Islamic monetary instrument, Bank Negara Malaysia Sukuk Ijarah. The inaugural issuance will take place on 16 February 2006 with an issue size of RM400 million. Bank Negara Malaysia will issue this instrument on a regular basis with subsequent issues ranging from RM100 million to RM200 million.

The National Shariah Advisory Council has approved this sukuk based on the Al-Ijarah or ‘sale and lease back’ concept, a structure that is widely used in the Middle East. A special purpose vehicle, BNM Sukuk Berhad has been established to issue the sukuk Ijarah. The proceeds from the issuance will be used to purchase Bank Negara Malaysia’s assets. The assets will then be leased to Bank Negara Malaysia for rental payment consideration, which is distributed to investors as a return on a semi-annual basis. Upon maturity of the sukuk Ijarah, which will coincide with end of the lease tenure, BNM Sukuk Berhad will then sell the assets back to Bank Negara Malaysia at a predetermined price.

The sukuk Ijarah will add to the diversity of monetary instruments used by Bank Negara Malaysia in managing liquidity in the Islamic Money Market. Due to its regular issuance, the sukuk Ijarah is expected to serve as a benchmark for other short to medium-term Islamic bonds. The introduction of sukuk Ijarah reflects the continuous efforts by BNM to spur product innovation and the development of products to meet the diversified requirements of domestic and international investors. This will augur well for the development of a vibrant and comprehensive Islamic bond market in Malaysia. It represents part of the overall effort to promote Kuala Lumpur as an international Islamic financial hub.