Planned changes in the financial regulations of Senegal, Kenya, Nigeria and South Africa that will allow for the issue of Sukuk are set to fuel a rebound in the international Sukuk market, a market that has been declining since 2008. The latest Global Sukuk Market report released by the International Islamic Financial Market (IIFM) indicates that Africa accounted for only 0.3% of global Sukuk issuances in the decade ending December 2010, all of which came from Sudan with some miniscule activity in The Gambia. The report also claimed international Sukuk issuances dropped from $13.8bn in 2007 to $5.3bn in 2010 which IIFN attributed to a lack of confidence from corporate issuers.
Sudan issued international Sukuk worth $130m in the 10 years to December 2010 accounting for 0.33% of global Sukuk. However, its domestic issues were $12bn accounting for 8% per cent of the value of world volumes of domestically issued Sukuk. This is set to change in the next two years after several African countries announced intentions to allow Sukuk issuance. Senegal for example plans a $200m Sukuk later this year. The Nigerian Treasury’s Debt Management Office is working out how to issue the country’s debut sovereign Sukuk within the next year while Kenya and South Africa are in the process of reforming their laws. Growing popularity of Sukuk in Africa is twofold; it is seen as an additional and cheaper avenue of raising development financing and will strengthen Shari’ah compliant capital markets in the continent, triggering development of other Shari’ah compliant financial instruments. “Sukuk are a trigger to the development of asset management and other Islamic finance capital market products in Africa because the funds generated say from Islamic finance will find a place to be invested in Africa rather than being invested offshore,” Hassan Bashir, the CEO of Nairobi-based Takaful Insurance of Africa said to The Islamic Globe. The IIFM report released to the public last week indicates that short-term Sukuk with maturities of one year and Sudan is the global leader with 66% of these issues followed by Bahrain, Brunei and Malaysia.
The report says that issuance trend indicates that Islamic countries will remain as the main drivers of the Sukuk market in the coming years while others from Europe, Africa, Central Asian Republics and the Far East may join if they see opportunity and advantage in issuing Sukuk.
source: The Islamic Globe