Sukuk issuance in Africa not as expected: S&P

CAIRO – 4 August 2017: The international sukuk market recorded improvement in the first half of 2017, S&P Global Ratings said in a Thursday report.

African countries did not contribute massive issuance of sukuk, the global rating agency said, noting that a total worth $2 billion has been issued by African sovereigns since 2014.

This rate was unexpected by S&P that holds positive prediction for infrastructure development in the continent, which it said results into more sukuk in Africa “because of the need for tangible assets as part of these Islamic finance transactions," said S&P Global Ratings credit analyst Samira Mensah in the report.

S&P expected African sukuk to provide diversification benefits for Islamic investors as well as additional financing opportunities, it noted, adding that sovereign sukuk issuance could, in the long term, facilitate the development of Sharia-compliant private-sector sukuk on the continent.

Few African countries will tap the sukuk market over the next 12-18 months because issuing this Islamic financial instrument is not a simple matter, S&P said.

"Among the challenges are the lack of clear legal and tax regimes to support a thriving sukuk market, and in many cases, the complexity of structuring the instrument can slow entry to market," Mensah added.