ALMATY, Kazakhstan, June 15, 2023 - The Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the Islamic Development Bank (IsDB) Group, made its first foray into the Kazakhstani Tenge market this week, tapping a growing appetite for Emerging Market currency-linked Islamic bond (Sukuk). The ICD printed its first Sukuk denominated in Tenge, raising KZT 2 billion with an auction of a five-year amortized Sukuk. The sukuk is rated 'A+' by Fitch Ratings.
The Tenge-denominated Sukuk ticks off a list of firsts. It is the first-ever KZT Sukuk in the World, the first Sukuk in the national currency of one of the Commonwealth of Independent States (CIS) and the first KZT Sukuk from an international development institution.
The Sukuk proceeds will be utilized for ICD’s on-ward financing to JSC “Leasing Group” (Leasing Group), whose securities are officially listed on Kazakhstan Stock Exchange. Leasing Group offers leasing products and caters primarily to small and medium-sized businesses operating across various industries. ICD and Leasing Group signed an agreement in relation to a Kazakhstan Tenge (KZT) denominated line of finance facility (LoF) in May 2023 to support private sector businesses, especially small and medium-sized enterprises (SMEs), in the country.
Considering this new milestone, Eng. Hani Salem Sonbol, the Acting Chief Executive Officer of ICD, commented:” The issuance of the tenge-denominated sukuk is in line with ICD’s strategy to source medium-term funding and create access to local currency finance for private sector expansion, helping to boost economic growth and create jobs. We are introducing a new asset class to the Kazakh fixed income market that is designed towards laying the foundations for other market players to follow.”
“The issuance of the inaugural KZT sukuk is a significant capital markets innovation and milestone for the region. Other currencies of member countries may be considered if there are opportunities to do so” added Eng. Hani Salem Sonbol.
An extensive groundwork was carried out to establish the framework and infrastructure for the first-ever Tenge-denominated sukuk issuance on the Kazakhstan Stock Exchange (KASE) has set the stage for a notable development in the country's financial market. Through collaboration with the local exchange and regulator, the necessary preparations have been made to ensure compliance with Islamic finance principles and local regulations. This pioneering effort, in Islamic finance, reflects Kazakhstan's commitment to fostering a robust and inclusive financial sector, opening up new avenues for investment and furthering the development of the country's capital market.
Tengri Partners Investment Banking acted as the Sole Lead Arranger & Broker for the landmark sukuk transaction. The international law firm of Bird & Bird acted as legal counsel for the transaction.
The Sukuk issuance is marked as a momentous transaction for the Republic of Kazakhstan because it required the coming together of several legal advisers, Shariah experts, the National Bank of Kazakhstan, the Kazakhstan Stock Exchange, market participants, Tengri Partners and ICD, to put together a structure used for the first time in Kazakhstan, which is intended to raise awareness of Islamic financing and pave way for others to follow.
In recent years, the ICD has focused its work on Africa, Central Asia and GCC. The ICD has advised several governments on their debut sales of Sukuk, including Senegal, Jordan, Togo, Mali, Maldives, and Ivory Coast. ICD hopes to attract private companies to the market as well. ICD was also a Joint Lead Manager/Joint Bookrunner in many Sukuk deals for investment grade issuers. ICD has seen an increasing demand from sovereigns and corporates who are willing to explore alternative financing methods such as Sukuk.