State-run Development Bank of Kazakhstan to issue first ever Sharia-compliant sukuk bonds

The State-run Development Bank of Kazakhstan plans to issue first ever Sharia-compliant sukuk bonds, the Bank’s Press Service reports. The planned overall sukuk program is worth $500 million, with the first five-year batch standing at $200-300 million, according to Newskaz.ru. The decision was taken March 14, 2012. The Bank and its consultants have turned to the industry regulators to define the procedures of the issue. Since fixed income, interest bearing bonds are not permissible in Islam, Sukuk securities are structured to comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Development Bank of Kazakhstan was established in 2001 to finance industrial infrastructure projects and attract internal and external investments. Eralier Tengrinews.kz reported, quoting the country’s Central Bank Governor Gregory Marchenko, that Kazakhstan is already home to Al Hilal Islamic Bank. The Bank is a 100% subsidiary of Al Hilal Bank, UAE, and the first Islamic bank in Kazakhstan and CIS countries. First Islamic banking license was obtained on 17th of March, 2010. The Bank has its subsidiaries based in Astana, Almaty and Shymkent. Besides, a Sharia-compliant Islamic Hajj Fund has been launched to facilitate savings schemes for those willing to administer Hajj (a pilgrimage to Mecca, Saudi Arabia, performed from the 8th to 12th day of Dhu al-Hijjah, the 12th and last month of the Islamic calendar) and Umrah (a pilgrimage to Mecca, Saudi Arabia, performed by Muslims that can be undertaken at any time of the year). Apart from that, Takaful Insurance Company offers Sharia-compliant insurance services for individuals. Back in 2011 the Spiritual Muslim Authority launched a new vehicle – Zakat Foundation – to manage donations. Zakāt is giving of a fixed portion of one's wealth to charity, generally to the poor and needy. To encourage Islamic securities, the Kazakh Stock Exchange accommodates a special Islamic securities section. To further develop Islamic financial products, the Government is developing an Islamic Finance Development Roadmap before 2020. The Finance Ministry is expected to issue sovereign sukuk, an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, to set a benchmark for corporate sukuk. The Program seeks to enhance taxation and accounting-related legislation with regards to Islamic products and to introduce a legal framework for Islamic insurance companies. Besides, efforts are being taken to attract investors (Islamic banks, takaful companies, investment funds).