Four of the five largest African economies have resorted to raising funds from the international financial markets through sukuk issuance in the last few weeks. The question is whether such issuances are now becoming a regular feature of the mainstream public debt raising mix of debt management offices DMOs at several African ministries of finance.
A sukuk is an Islamic financial trust certificate, equivalent to a bond in conventional finance, that complies with Islamic religious law commonly known as sharia. Since the traditional Western interest-paying bond structure is not permissible, the issuer of a sukuk essentially sells an investor group a certificate, and then uses the proceeds to purchase an asset, repaying investors with funds accruing from the acquisition.
Sovereign debt is the bane of many countries, irrespective of economic status, and carries the burden of exorbitant debt servicing and finance costs, especially for developing countries, because of exaggerated risk perceptions by rating agencies. Africa is no exception in this respect.
But the playbook of African sukuk issuance is changing and assuming a 'Made in Africa' element, which may yet serve as a model for other equivalent issuers elsewhere. At the end of June 2025, Egypt for instance raised 1bn through the issuance of a leasing sukuk with a tenor of three years, priced at a rate of return of 7.875 per annum, payable semi-annually in arrears.
What is unique is that the entire issuance was underwritten by one bank, Kuwait Finance House KFH, through a private placement, which also saves on costs associated with investor roadshows and calls, ratings and bourse listings. KFH is no ordinary bank. It is one of the largest in terms of assets under management and the second oldest Islamic bank in the world, established in 1977. Prior to this, Egypt raised 1.5bn through a similar leasing sukuk in February 2023.