Clare Nuttall in Almaty -
The Development Bank of Kazakhstan has launched the country's first ever Islamic bond. The quasi-sovereign issue could set a benchmark for Kazakh sukuk, opening the way for corporate Islamic bonds to be placed in future.
The paper, issued in Kazakhstan and Malaysia, has a value of MYR240m ($76.6m). Halyk Finance, the bookrunner for the issue, says the bond has been placed for five years and has a yield of 5.5% a year. Thirty eight percent of the issue was placed within Kazakhstan, with the bulk in Kuala Lumpur. The majority of buyers are based in the global centre for Islamic finance, with 62% of the issue being purchased by Malaysian investors. Overall, 82% of orders came from pension funds, according to C-Bonds.
"The DBK has become the first bank in the post-Soviet space to issue sukuk in accordance with the norms of Shariah law. This is a serious achievement for the bank and Kazakhstan in general," DBK's deputy CEO, Zhaslan Madiyev, said in a statement.
The DBK decided in March to place medium-term Islamic bonds, denominated in Malaysian ringgit. The bank's board has agreed a programme with a total value of $500m. The issue is an important step for development of Kazakhstan's Islamic finance market, as the quasi-sovereign sukuk from state-owned DBK sets a benchmark for future corporate issues, the bank claims. "We are confident that the transaction will pave the way for other similar issues and serve to diversify Islamic financing in the region," Madiyev said.
However, despite calling it a "very positive step," Prasad Abraham, chairman of Kazakhstan's first Islamic Bank, Al Hilal Bank Kazakhstan told bne in June that in view of DBK's government backing, a pure corporate issue on a similar scale is unlikely. "Within Kazakhstan, there is a group of very strong top-end companies, many with a degree of government ownership, that are being targeted by all major banks. At the other end of the scale, small and medium-sized companies are still struggling for money, as the banks are being more conservative," he suggested.
The Kazakh government's interest in establishing an Islamic finance sector grew during the first wave of the 2008 crisis, when finance from traditional sources dried up. Although the majority of Kazakhstan's population is Muslim, many - though by no means all - have embraced western credit culture. However, Astana is looking to diversify its funding sources, and interest in Islamic finance remains high.
Naubet Bisenov in Almaty - A free-floating exchange regime for Kazakhstan’s currency, the tenge, is taking its toll on retail trade as the cost of imports rise. While prices have not changed ... more
Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more
bne IntelliNews - The National Bank of Kazakhstan, the central bank, has re-adopted a free-floating exchange regime under the new governor, Daniyar Akishev, who has ... more