The demand for Islamic Sukuk is expected to reach to $900 billion by 2017, according to Ernst & Young’s Global Islamic Banking of Excellence (GIBE) estimates.
Ernst & Young’s GIBE reports that the forecasted exponential increase in demand for Sukuk stems from the growth of Islamic banking industry, and the increasing demand for financial tools in compliance with Islamic Shari’a Law. Sukuk are essentially Islamic bonds in which creditors buy shares in an investment or project in order to make profit, unlike traditional bonds and other financial tools where profit is derived from interest.
Interest in Shari’a-compliant financial tools has existed for several years in Egypt, gaining momentum after the economic crisis that followed the 25 January uprising. The search for a mechanism to finance small and medium sized enterprises paves the way for the introduction of Sukuk, analysts say. There is no interest attached, with a form of partnership and risk sharing between creditors and entrepreneurs taking its place.
The Muslim Brotherhood’s political arm the Freedom and Justice Party (FJP) reportedly mooted the idea of promoting Islamic banking and finance in Egypt to exist alongside conventional banking and finance, to promote economic growth and boost investment.
Prime Minister Hesham Qandil told reporters during his first visit to Egypt’s Stock Exchange (ESE) last Monday about the importance of introducing new financial tools, referring to Sukuk, to uplift investment and bolster the economy.
State-owned Al-Ahram newspaper, reported 14 August Ashraf el-Sharqqawy as saying that finalising the Sukuk executive regulations will occur within two months. In the meantime, discussions over Sukuk executive regulations continue.