AMMAN –– The government may need to issue new pieces of legislation or find a new mechanism to speed up the issuance of Islamic sukuk, Minister of Finance Mohammad Abu Hammour said on Thursday.

According to web-based Islamic finance sites, sukuk (plural of sakk) are asset-backed securities designed to provide a relatively fixed stream of investment income without violating Sharia (Islamic law) and the prohibition of interest.

“We are very interested in Islamic sukuk especially that Islamic banks were less affected by the global financial crisis [than commercial banks],” the minister stated, adding that there are some legislative obstacles that restrict the government from using such financing instruments.

He explained that amending relevant legislation will take time, but there remains the option of working out a legal solution as soon as possible.

Abu Hammour underlined the $100 million agreement the ministry signed with the Jordan Islamic Bank under which the bank will extend to the government the required funds for its imports of wheat and barley. The agreement is governed by a murabaha contract, one of the Islamic finance and investment instruments applied by Islamic banks.

According to Islamic definitions, murabaha is not an interest-bearing loan. Murabaha is an acceptable form of credit sale under Sharia. Basically, under a murabaha contract, the bank buys a commodity upon orders from a customer and resells it to the beneficiary, in instalments, and with a margin of profit.

Saying that Islamic finance instruments are still untapped to finance government projects, the official said that Islamic banks enjoy high liquidity levels and the ministry is working to open the market to financial institutions based on Islamic principles as soon as possible.

Last year, the ministry and the International Monetary Fund were reviewing financial legislations in Jordan to issue sukuk.

A ministry official has previously said once the project is ready to issue Islamic bonds, it would be presented to the Iftaa Department to issue a fatwa (religious edict) in this regard, which, he said, would attract companies dealing in Islamic finance to invest in such instruments.