(Bloomberg) -- The U.K.’s push into Islamic finance this year is showing Kazakhstan and Azerbaijan the timing is right for their own plans to sell Shariah-compliant debt.
Kazakhstan’s central bank said last week that legislation to allow the sale of sukuk is “already prepared,” with sovereign and corporate issuance seen over the next five years.
Laws permitting Azerbaijan to allow Islamic bond offerings will be introduced in 2015, and the government may issue securities that adhere to Islam’s ban on interest the following year, according to state-controlled International Bank of Azerbaijan.
Britain’s debut sukuk sale in June, which saw demand exceed supply by more than 10 times, shows the Islamic industry is able to lure investors in major financial centers, according to Kazakh Central Bank Chairman Kairat Kelimbetov. Global issuance has climbed 15 percent this year from the same period in 2013, with South Africa, Hong Kong and Luxembourg also entering the market, according to data compiled by Bloomberg.
“The great interest is showing Islamic finance is becoming an attractive funding tool,” Kelimbetov said at a press conference in Kazakhstan on Oct. 30, according to a government website.
U.K. Prime Minister David Cameron has pushed for sukuk sales to help establish London as a global capital for Islamic finance alongside Dubai and Kuala Lumpur, and tap into an industry that Ernst & Young LLP estimates will almost double to $3.4 trillion by 2018.
The yield on the U.K.’s Shariah-compliant notes due July 2019 fell 23 basis points so far this quarter to 1.53 percent at 11:37 a.m. in London.
“London has issued sukuk, and it is creating a favorable environment for local banks,” Behnam Gurbanzada, director of Islamic banking at the International Bank of Azerbaijan, said by phone on Nov. 3. “We’ve been doing it for 10 years and we’re now at the finish line. We would like to coordinate more closely with London on legislative questions.”
The IBA is helping the government to draft its sukuk regulation, and plans to convert its Islamic unit to a standalone Shariah-compliant lender after the country passes
legislation to grant licenses, said Gurbanzada.
In Kazakhstan, the government is working on a law to allow for full-fledged Islamic banks, Kelimbetov said.
Even though Kazakhstan and Azerbaijan are building the regulatory frameworks for their Shariah finance industries, they “need Islamic banks, insurance, institutions and all of that,” Sheikh Bilal Khan, a co-chairman of Dome Advisory Ltd., said by phone from London yesterday. “It’s these that are lacking in both countries.”
Still, the Central Asian countries won’t rush the development of their Shariah-compliant industries, IBA’s Gurbanzada and the Kazakh central bank’s Kelimbetov said.
“We don’t want to invent the bicycle, we don’t want to lose time and make mistakes,” Gurbanzada said. “We see Dubai and Qatar closely cooperating with London and they are growing. We would like our government to follow the same model.”
Bakudaily.Az
