ALGIERS, Algeria, May 20. Sukuk, or Sharia-compliant bonds, could play a key role in attracting foreign investors seeking opportunities in Central Asia, reads the joint report of the Eurasian Development Bank, the Islamic Bank Institute and the London Stock Exchange Group.
It was presented during the IsDB annual meetings in Algiers, Trend’s special correspondent reports.
“For Sukuk to flourish in the region, a number of enabling factors will need to be realised, such as a level playing field in tax laws and capital markets regulation, more benchmark sovereign Sukuk issuances, and the subsequent fostering of a corporate Ṣukūk market in Central Asia,” reads the report.
The authors note that over the next 5-10 years, as Central Asian countries continue to build on previous initiatives, momentum should build towards strengthening the fundamentals underpinning their nascent Islamic finance ecosystems.
“These could include a more developed Islamic banking landscape with more varied products and services on offer, thriving Islamic capital markets with greater Ṣukūk and Sharī‘ah-compliant equity issuances, and growing markets for Islamic asset management and Islamic FinTech. Beyond these core elements, Central Asian jurisdictions may also look to eventually incorporate wider developments from the evolution of Islamic finance in leading jurisdictions such as Malaysia and the UAE, as well as market practices from large Islamic economies such as Saudi Arabia and Indonesia,” the document says.
The report reveals that some of these developments would likely
include a move towards greater integration of Islamic finance with
ESG and sustainability practices; linkages with the ḥalāl economy
sectors such as ḥalāl food, Muslim-friendly travel and tourism, and
modest fashion; and the deepening of Islamic banking products and
services and local Islamic capital markets so that Central Asian
Islamic banks can increase their domestic market shares and Central
Asian countries can tap foreign investments into
their burgeoning economies.
“As a sector, the Islamic finance industry in these five
countries will need to develop a wide range of products and
services that can serve Sharī‘ah-sensitive corporates and investors
looking to Central Asia for business and investment opportunities.
Products such as working capital (e.g., murābaḥah-based
contracts), leasing (ijārah structures), and various trade finance
instruments (such as Sharī‘ahcompliant letters of credit) may be
needed to cater to these corporates’ needs in Central Asia,” the
document says.