Egypt's cabinet follows up on first sovereign sukuk offering

It is expected that the size of the Islamic banking industry will reach abouts $3.2trln by the end of 2022: minister

  
An employee counts Egyptian pounds at a foreign exchange office in central Cairo, Egypt, March 20, 2019. Image used for illustrative purpose.

An employee counts Egyptian pounds at a foreign exchange office in central Cairo, Egypt, March 20, 2019. Image used for illustrative purpose.

REUTERS/Mohamed Abd El Ghany

Egypt’s Prime Minister Mostafa Madbouly and Minister of Finance Mohamed Maait followed up on the procedures for issuing the first sovereign sukuk offering and the benefits of financing through this mechanism in a meeting on Tuesday.

Madbouly affirmed that sovereign sukuk are one of the most important financing tools, explaining that sukuk is capable of providing funding for investment and development projects.

During the meeting, Maait reviewed the development of Islamic banking activity, explaining that the size of the Islamic banking industry worldwide during the year 2020 amounted to about $2.7 trillion, and it is expected that the size of this industry will reach abouts $3.2 trillion by the end of 2022.

He added that the volume of Islamic banking work in Egypt amounted to about EGP 347bn by the end of June 2020 and is expected to exceed EGP 500bn by the end of June 2022.

Furthermore, Maait said that the value of deposits in Islamic transactions as of 30 June 2021 amounted to about EGP 321.7bn, an increase of EGP 31.1bn (10.7%) compared to the previous year. He explained that deposits in Islamic transactions represent 7% of the total volume of bank deposits in the Egyptian market.

The minister also reviewed the importance of issuing sovereign sukuk, as they are characterised by attracting a new segment of Arab and foreign investors — especially from the Middle East, North Africa and Asia — who prefer financial transactions within Islamic Sharia principles.

He explained that sukuk issuances also provide low returns compared to returns on debt instruments that are time-dated.

Moreover, he stressed that sovereign sukuk issuances do not affect the state’s public debt. The proceeds of sovereign sukuk issuances are allocated to investment and development projects included in the economic and social development plan in the state’s general budget.

The Ministry of Finance has previously stated that Sukuk will contribute to achieve development goals in a manner consistent with the state’s efforts to enhance aspects of spending on improving the standard of living for citizens.

Maait asserted that the issuance will be carried out in accordance with any of the formulas compatible with the principles of Islamic Sharia approved by the Control Committee stipulated by law and on the basis of the issuance contract; and its issuance, circulation, and redemption are subject to controls, rules, and procedures that are compatible with the principles of Islamic Sharia.

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