Asked about the possible size of the issue, he said: “In order to fix a benchmark, below $500mn is not usually recommended.”
Oil-rich Kazakhstan, where 70% of the 16.4mn population are Muslim, is being touted as a potential new market for Islamic finance. Gross domestic product has grown by an average 8% a year in the last decade to reach almost $150bn.
Abu Dhabi-based Al Hilal Bank opened the first Islamic bank in Kazakhstan last year, with plans to invest as much as $1bn over the next two years. Malaysian trustee firm Amanah Raya Bhd is expected to open the second this year.
“In the lower house of parliament, changes to the law on Islamic financing were passed in two readings,” Zhamishev said. “Now it will go to the Senate, and I think that within one month the legislation will be passed.
“The legal basis will then be in place for the state to issue Islamic bonds.”
The modern, $1tn global Islamic finance sector had its origins three decades ago, but its guiding principles—such as a prohibition on paying interest—would have been familiar to Muslim traders on the mediaeval Silk Road through Central Asia.
Kazakhstan first mooted the idea of issuing sovereign sukuk during the global financial crisis, especially as Western credit dried up. New money from the Middle East and Asia ensured that 2008 and 2009 were record years for foreign direct investment.
Zhamishev said the government would not rush to issue sukuk and would wait to ensure the timing was right. “We want to make sure that the benchmark is fixed at a level that is positive for the country,” he said.
Though some private issuers, impatient after the postponement of the previous plan to issue sovereign debt, might push to tap the market first, Zhamishev said the state should set the benchmark for sukuk issuance in Kazakhstan.