Small UK company to launch first European corporate sukuk

London: A small British manufacturer has become the first company in Europe to raise funds through sukuk, starting off an industry which has struggled to find traction.

International Innovative Technologies, a maker of industrial milling machines in northeast England, has raised $10 million (Dh36.7 million) through a private-equity-style sukuk to help develop new products, its legal adviser, Norton Rose, told Reuters.

Dubai-based Millennium Private Equity Ltd will be the sole investor in the sukuk, which will be listed on the Cayman Islands Stock Exchange. The sukuk will pay 10 per cent a year and will expire in 2014.

The sukuk is using a so-called musharaka structure, also known as profit and loss sharing, allowing Millennium an option to take a stake in IIT.

Sharia compliant

"There is absolutely no reason [why] other corporates and government entities cannot follow suit," said Farmida Bi, the Norton Rose partner who worked on the transaction.

"They [IIT] found an investor which could only invest in a Sharia-compliant way, hence the structure. This is important. Many Islamic investors are looking at potential investments, particularly in the high-tech sector," she said.

Sukuk are generally certificates of ownership of either an asset or a project, or as in the IIT case, a business venture.

In musharaka, parties contribute capital to a venture with profits to be shared in an agreed ratio, while losses are generally divided in line with capital contributions.