Egypt finalizes draft Sukuk law (By IFN)

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EGYPT: Waning faith in the Muslim Brotherhood’s ruling Freedom and Justice Party (FJP) and their elected president Mohamed Morsi may have spilled over into the Islamic finance space, as a newly released draft Sukuk law by the Egyptian Financial Supervisory Authority (EFSA) overlooked rules for sovereign issuances. The law includes up to 30 items detailing the legal framework for issuing Sukuk, but currently only limits sales to corporates and “legal persons”, with no stipulation for sovereign Sukuk. Ahmed El-Najjar, a member of the economic committee at the FJP, which was involved in discussions for the law together with EFSA and the Al-Nour Party and had suggested the inclusion of sovereign Sukuk, noted that the proposed new rules have not created an adequate legal framework for Sukuk; stressing the need for a unified law covering government, private and public-private sector issuances. Industry players have nonetheless expressed optimism for the introduction of sovereign Sukuk in Egypt. “I expect that the government will issue a sovereign Sukuk as it will be beneficial to the country’s economy as Egypt’s investment rates and foreign reserves have shown a steep decline. “The government has previously relied on treasury bills and certificates of deposit for capital, but I don’t expect this to be the ongoing trend for fundraising,” Professor Dr Shahinaz Rashad, CEO of the Egyptian Leasing Association told Islamic Finance news in a September 2012 interview. In a separate interview with us, Iqbal Khan, CEO of Fajr Capital, commenting on Islamic finance in Egypt, said that: “When a change of the magnitude and nature in Egypt happens, we cannot expect a seamless transition. The will of people of Egypt is behind responsible banking and this will drive the growth of Islamic finance there.” The country’s journey into Islamic finance looks set to be in for a long road ahead however – According to Ahmed, if the draft Sukuk law is passed, it will then be brought to Egypt’s upper house of parliament for a final decision.