Kazakhstan may soon see a Sukuk issuance in the agricultural industry as the country recognizes the Islamic financial instrument as a powerful tool for investment and financing, especially for the sector.
The Ministry of Foreign Affairs of Kazakhstan, in collaboration with the Islamic Organization for Food Security (IOFS), recently held a seminar titled ‘Sukuk for Investments in Agriculture’ as speakers and experts delved into various aspects of Sukuk and its relevance to the agricultural sector.
The seminar was attended by Minister of Agriculture of Kazakhstan Yerbol Karashukeev, Deputy Minister of Foreign Affairs of Kazakhstan Kanat Tumysh, representatives from state bodies and departments and Kazakhstani and foreign private companies.
In his opening speech, Yerbol noted that entering the Islamic finance market and studying it is a priority in attracting additional sources of financing for the domestic agro-industrial sector.
On the other hand, Kanat noted the relevance of raising awareness of Sukuk for investment in agriculture and drew the attention of the participants to the fact that Kazakhstan is a Central Asian hub for Islamic finance.
The participants of the seminar agreed that Sukuk can become one of the most powerful instruments for investment and financing in the agricultural sector, since the use of Sukuk can help increase liquidity in domestic capital markets and attract foreign investment in the real sector of the economy.
According to the representatives of the IOFS, the integration of Sukuk into the agricultural sector of Kazakhstan will provide opportunities for sustainable growth in all areas of agriculture.
To date, Kazakhstan has yet to issue sovereign Sukuk. In 2020, the Astana International Exchange (AIX) cross-listed Sukuk for the first time, issued by QIIB. In 2022, Sukuk issued by the IsDB were also cross-listed on the AIX.
Most recently, the Islamic Corporation for the Development of the Private Sector, the private sector arm of the IsDB Group, printed its first Kazakhstan tenge-denominated Sukuk, raising KZT2 billion (US$4.41 million) with an auction of a five-year amortized Sukuk facility, rated ‘A+’ by Fitch Ratings.
The Kazakh government is aiming for the Islamic finance industry’s market share to reach up to 3–5% by 2025, as part of the 2020–2025 Master Plan for Islamic Finance Development.
However, according to Fitch, the Sukuk market in Kazakhstan is underdeveloped, with only one issuance so far in 2012.