The three leading Islamist parties will hold a workshop next week to discuss a draft legal framework to regulate the issue of sukuk (Islamic Shari’a compliant bonds).
Ahmed Al-Naggar, member of the economic committee at the Freedom and Justice Party (FJP), said his party would meet with Al-Nour and Al-Wassat parties “to come up with a common vision about what the sukuk legal framework should be.” Non-Islamist parties would be welcome to offer their vision too he said.
“Forging a legal framework for issuing sukuk requires review; at the top is the current Capital Market Law, the executive bylaws and procedures and regulations, which the Egyptian Financial Supervisory Authority (EFSA) is in charge of,” Al-Naggar said. This required coordination with various parties including government, investment banks and political parties, he added.
The current Capital Market Law No. 95 of 1992 mentions sukuk. However, experts say the detail is insufficient. In June 2011, the EFSA provisionally approved the amendment of the Capital Market Law to allow for the introduction of sukuk to the market.
The dissolution of the Islamist-dominated parliament in June created a legislative predicament that halted the discussion over Capital Market Law amendments. However, the Head of the economic committee of Al-Nour party, Tarek Shaalan, said discussions had moved from parliament to parties’ headquarters.
Al-Naggar said the involved Islamist parties are committed to complete coordination with the government, EFSA, investment banks, as well as other non-Islamist parties in order to come up with a temporary legal framework for sukuk.
Interest in Shari’a compliant debt tools such as sukuk is high considering the current financial crisis. Government officials stressed the need for diversifying debt tools to attract new investors, especially those who are wary of interest rates attached to conventional debt tools.
Initially, the idea of introducing sukuk to the Egyptian market was proposed by FJP members of parliament, who held a majority in the now dissolved-parliament.
The Muslim Brotherhood member who articulated the FJP’s economic plan, Ashraf Badr El-Din, argued that introducing sukuk would encourage a greater segment of society to inject their money into the market since they have reservations over interest rates attached to conventional debt notes, the Muslim Brotherhood’s official website, Ikhwanonline, quoted Badr El-Din.
Proponents of sukuk believe also that introducing Shari’a compliant debt tools will attract investors from the Persian Gulf and Southeast Asia, as well as European banks.
Against the backdrop of the global financial crisis, non-conventional fiscal tools such as sukuk have experienced increased demand. Ernst & Young’s Global Islamic Banking of Excellence (GIBE) forecast an exponential increase in the demand for Islamic sukuk to reach $900 billion by 2017.