May 18, 2016 (LBO) – Sri Lanka could issue Islamic finance sovereign bonds or ‘Sukuks’ and take the lead in becoming a regional centre for Islamic financial services, an official said.
“We can think of being an Islamic Banking and Finance hub for the region,” Shibly Aziz, President Bar Association said while delivering the keynote address at an Islamic finance conference organized by UTO Educonsult, a consultancy, recently.
“As in South Asia there are three countries that have the largest Muslim population, India, Pakistan and Bangladesh.”
Sri Lanka already has more than twenty years experience in Islamic finance with an approved Islamic bank in operations.
Several Sri Lankan banks also have ‘Islamic banking’ windows. He says Sri Lanka could issue a ‘Sukuk’ or sovereign bond compliant with Shariah or Muslim religious law which could help raise funds for the islands proposed development projects.
“Sri Lanka is also looking at alternate finance methods to raise capital for some of the big development projects like the Megapolis,” he said.
“Sukuk have been used for funding infrastructure – this is a good alternative to look at as appose to the bond markets.”
It can open Sri Lanka to a new niche of investors rather than the conventional ones, he said. Aziz added that Islamic financial instruments are also issued and bought by non-Muslims that countries.
“Countries like the United Kingdom, Korea and Japan are still issuing sukuks or are in the process of doing so.”
Middle Eastern nations and Malaysia have issued Islamic bonds for years. Global Islamic finance is valued at more than a trillion dollars.
Islamic financial instruments are structured on a profit sharing model so that it stands out from the interest yielding structure of conventional finance and is attractive to investors who want to be compliant with Shariah laws.