- Market Evolution & Strategic Positioning:
Given your role connecting GCC institutions with African ventures, how do you frame the value proposition of Sukuk to an African sovereign or corporate issuer compared to conventional Eurobonds? Is it primarily about cost, investor diversification, or alignment with developmental values?
Answer
Excellent question! In practice, the answer takes all three into account, but with different weightings depending on the issuer’s profile.
When I present Sukuk to a sovereign issuer or a large African private institution, I generally structure the value proposition around four strategic pillars, namely:
1- Diversification and access to a new Market depth
This is often the strongest argument initially because conventional Eurobonds primarily target Western funds (US, UK, Europe), global asset managers, and hedge funds. Sukuk, on the other hand, also open access to Islamic banks in the GCC (Saudi Arabia, UAE, Qatar, Kuwait), sovereign wealth funds, Takaful (Islamic insurers), Asian Islamic institutional investors (Malaysia, Indonesia), and Sharia-compliant liquidity pools that cannot purchase conventional bonds. For an African issuer, this means a broader investor base, less dependence on Western markets and greater resilience in times of global volatility. In a context where several African countries have seen their spreads on eurobonds explode, diversification becomes a tool for managing sovereign risk.
2- Cost optimization (but not always mechanical)
The question of cost is important, but I present it with nuance. When Sukuk can be cheaper, it is due to strong regional demand from the GCC, a well-calibrated structure, a rare issuer on the market (scarcity premium), and abundant liquidity in Islamic banks. A pricing advantage of 10 to 40 basis points (bps) is sometimes observed, but it’s not automatic. However, be aware that this requires more complex structuring, specific documentation, the need for underlying assets, and higher initial legal fees. The real gain comes mainly from the competitive tension between two investor bases, not solely from a mechanical interest rate differential.
3- Alignment with development priorities
This is an increasingly strategic argument because Sukuk are particularly well-suited to financing infrastructure, energy, water, transportation, social housing, hospitals, and green projects (Green Sukuk). They are based on a principle of linking to a real asset, which resonates strongly with ESG agendas, the Sustainable Development Goals (SDGs), and sustainable finance.
For an African sovereign, this allows the issue to be positioned as an instrument for financing real development rather than a simple budgetary refinancing, and it improves international perception.
4- Political and geo-economic signal
This aspect should not be underestimated, as a Sukuk issuance signals strengthened South-South ties, integration with the GCC, openness to Islamic Asia, and financial sophistication. For some African countries (West Africa, East Africa), there is also a natural alignment with their demographics and local banking systems. So, is it primarily the cost? No.
In summary, Sukuk are not simply a technical alternative to Eurobonds. They constitute a strategic diversification tool, a means of accessing GCC liquidity, and a vehicle for financing development rooted in the real economy. Cost is important—but rarely the sole deciding factor.
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- Structuring for Development & Returns:
In your experience structuring Islamic finance for public-private partnerships (PPPs) in Africa, what are the specific challenges and opportunities in using Sukuk structuresto finance tangible infrastructure assets? How do you balance project bankability, Shariah compliance, and attractive returns for GCC investors?
Answer
Excellent question—this delves into the technical and strategic core of Sukuk as applied to African PPPs.
Based on field experience (structuring, discussions with finance ministries, religious authorities, Islamic banks in the GCC, and sponsors), the issue isn’t solely financial: it’s a balancing act between three simultaneous constraints: Bankability, Sharia compliance, and attractiveness to GCC investors.
And this is precisely where both the challenges … and the opportunities lie.
(I.) Specific Opportunities of Sukuk in African PPPs
1- Natural Alignment with Infrastructure Assets
Sukuk are backed by real assets — which perfectly matches infrastructure PPPs, including toll roads, airports, ports, power plants, solar projects, hospitals, water networks….
Unlike Eurobonds (pure debt), Sukuk can be structured as Ijara (asset leasing), Istisna’a + Ijara (construction followed by leasing), or Musharaka/Mudaraba (investment partnership). For tangible infrastructure, the structural compatibility is strong.
2- Structural appetite of GCC investors for real assets
- Islamic banks and funds in the Gulf prefer stable and visible cash flows, favor tangible assets, seek higher returns than Gulf sovereigns, and have abundant liquidity to invest in Sharia compliance
- A well-structured African PPP can offer 150 to 400 bps above the GCC sovereign, geographic diversification, a real economic impact profile; it is attractive if the risk is properly managed.
3- Innovation Potential: Green Sukuk and Blended Finance
Energy and water infrastructure projects in Africa are particularly well-suited to Green Sukuk, Sustainability-Linked Sukuk, and blended structures with multilateral guarantees. The involvement of institutions such as the AfDB, IFC, and similar entities can transform a project perceived as risky into an investmentable product for the GCC.
(II.) Major Challenges
✓ The Challenge of Actual Bankability
The main obstacle is not Sharia law. It is sovereign risk, convertibility risk, offtaker risk, and regulatory instability. GCC investors are not buying “Africa.” They are buying legally secured cash flows. If there is no clear sovereign guarantee, an offshore escrow mechanism, or protection against exchange rate risk, the transaction becomes difficult.
✓ The tension between risk transfer and Sharia compliance
In Islamic theory, risk must be shared, and returns must correspond to actual risk. But in practice, institutional investors in the GCC want predictability, stable cash flows, and near-sovereign risk. The challenge is to structure a product that is Sharia compliant but economically investment grade.
✓ Legal complexity and coordination
An Islamic PPP involves certain appropriate legal conditions, but in some African countries, the legal environment is not yet fully adapted.
(III.) How to reconcile bankability, Sharia, and profitability?
Experience shows that this relies on 5 key levers:
Lever 1 – Intelligent hybrid structuring, which is the most effective model in Africa: Istisna’a (construction) and Ijara (operation)
- During construction: progressive financing
- After delivery: fixed rents paid by the state or the offtaker
This allows for the following:
- Sharia compliance
- Predictable cash flows
- Stable return
Lever 2 – Securing Flows
The following are essential for GCC investors:
- Secure offshore account
- Clear waterfall
- Multilateral partial guarantee
- Step-in rights clause
The more the flow is isolated from political risk, the lower the pricing.
Lever 3 – Development Institution Intervention
A Sukuk PPP becomes much more attractive if the AfDB/ISDB provides a partial guarantee, the IFC participates as a co-investor, and an FX hedging mechanism is in place; this can reduce the spread by 100–200 basis points.
Lever 4 – Credible Sharia Governance
GCC investors want a recognized Sharia board, a structure accepted in multiple jurisdictions, and no doctrinal controversy. The credibility of the Sharia board is a pricing factor.
Lever 5 – Strategic Narrative
A purely financial project attracts investors. A structuring project attracts strategic partners.
Geo-economic positioning influences demand.
(IV.) The True Arbitration
The reality is this: If the project is economically weak, the Sukuk will not save it. But if the project is sound, the Sukuk can:
- Reduce the overall cost of capital
- Expand the investor base
- Strengthen international credibility
- Build a financial bridge between Africa and the GCC
The Sukuk for PPPs in Africa are not simply a financial tool. They are a strategic financial engineering instrument at the intersection of development, geo-economics, sophisticated legal structuring, and institutional Islamic finance. The key is not to choose between Sharia compliance, bankability, or yield. The key is to design an architecture where all three reinforce each other.
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- The GCC-Africa Corridor & Standardization:
You operate at the nexus of GCC capital and African projects. How significant are the differences in Shariah interpretations and legal frameworks between these regions as a practical barrier? What steps are most needed to create a smoother, standardized pipeline for Sukuk flows into Africa?
Answer
A central and often underestimated—issue.
Differences in Sharia interpretation and discrepancies in legal frameworks do not structurally block African-GCC Sukuk transactions… but they do create transactional friction, a premium on legal uncertainty, and sometimes a reduction in the investor pool. In other words: it’s not an insurmountable obstacle, but it is a cost.
- Where do the real differences lie?
1- Differences in Sharia interpretation (GCC versus Asia versus Africa)
The main areas of divergence concern:
- The nature of the asset transfer
Is the transfer “true sale”? Is it simply profitable? Is the asset truly isolated?
Some scholars in the GCC are more conservative than those in other jurisdictions (e.g., Malaysia).
- Purchase undertakings are a sensitive issue.
In Sukuk Ijara or Musharaka, the purchase at face value can be challenged on doctrinal grounds. Some jurisdictions accept more flexible mechanisms. A Saudi investor may be stricter than a Malaysian investor.
- The actual sharing of risk
Doctrine requires that there is no guaranteed return without real risk. However, institutional investors seek near-bond predictability, and this tension is constant.
2- Legal Differences: Africa versus GCC
This is often more significant than religious differences. Frequent issues include the conflict between African civil law and English common law, the recognition of offshore special purpose vehicles (SPVs), the validity of true sales, the enforcement of security interests, the taxation of asset transfers, and potential double taxation. In some African countries, the public-private partnership (PPP) framework is not harmonized, and courts lack jurisprudence in Islamic finance. The concept of a trust is nonexistent, creating uncertainty for GCC investors.
- Is this a blocking obstacle?
In practice, Rarely blocking, But generating a risk premium. An African Sukuk can be structured even with English law, an offshore SPV, a Listing in London or Dubai because the market has learned to “externalize” the legal risk. The real problem arises when the local framework does not recognize certain mechanisms and taxation makes the structure inefficient. Sharia compliance is publicly challenged and in this case the investor withdraws.
III. The Most Necessary Measures to Streamline Flows
If we want to normalize GCC → Africa flows, five key areas are essential:
- Minimal Sharia harmonization (doctrinal pragmatism) with the aim of avoiding controversies through the adoption or recognition of AAOIFI standards, a Sharia board composed of scholars recognized within the GCC, and prior validation by key investors (anchor investors).
- Specific tax reforms are crucial because Sukuk involve asset sales, leasing, and repurchase. Tax neutrality is necessary through the elimination of double taxation, registration fees, and VAT. Several countries (UK, Luxembourg, Morocco) have introduced specific tax neutrality for Sukuk. Without this, the cost inevitably increases.
- Legal standardization; Investors want English law or internationally recognized law, international arbitration (LCIA, DIFC), political risk-free SPVs and standard documentation.
- Secondary market development; Currently, the secondary market for African Sukuk is small, relatively inactive, and dominated by buy-and-hold strategies. Liquidity provides reassurance to non-GCC investors.
- Catalytic role of multilateral organizations; The presence of IsDB, ADB, IFC, AFC can neutralize political risk, enforcement risk, the perception of legal instability and they play a normative bridge role between systems.
- The Real Strategic Challenge
The problem is not theological; it is institutional.
GCC investors want legal certainty, regulatory stability, clear governance, and predictable execution. Sharia compliance is necessary—but legal certainty is crucial.
- Strategic Perspective
In the medium term, three developments could transform the landscape:
- Creation of regional African hubs for Islamic finance (e.g., Morocco, Nigeria, Kenya).
- Bilateral agreements between Africa and the GCC on the recognition of structures.
- Progressive standardization through multilateral platforms.
Differences in Sharia law and legal frameworks are not a structural obstacle. They become an obstacle when the structure is innovative but legally fragile, doctrinal compliance is questionable, or the tax framework is unsuitable. The solution is not perfect uniformity, but rather: predictability + standardization + tax neutrality + Sharia credibility. When these four elements are combined, GCC capital flows much more freely to Africa.
- Investor Base & Strategic Partners:
Beyond the traditional buy-and-hold GCC banks and funds, what other investor classes (e.g., global ESG funds, private credit, institutional investors from Asia/Europe) have you engaged with for African Sukuk? What are their primary concerns regarding liquidity and exit mechanisms?
Answer
Excellent question and very practical. In practice, the African Sukuk that are successful today are those that don’t rely exclusively on Islamic banks and GCC buy-and-hold funds, but rather integrate a broader investor base. Here are the main categories we’ve worked with (directly or via syndication) and their specific concerns regarding liquidity and exit.
- Global ESG funds (Europe, Nordics, Canada) prioritize strong compatibility between Islamic finance and ESG principles, along with an interest in Green/Sustainability Sukuk and fund traceability, environmental impact, and governance. Their key concerns regarding secondary liquidity include a limited secondary market with few active market makers, and exit mechanisms such as the ability to quickly sell the securities in times of stress. They often request a liquidity premium for small or exotic issues.
- Private credit/infrastructure debt funds (Europe & US) are more technically skilled and opportunistic players. They are interested in Sukuk for their higher returns compared to European infrastructure. Their main concerns are enforcement in case of default based on the validity of the collateral, and for exit, they demand a complexity premium; thus, for them, exit is not a stock market transaction but a contractual one. The success of African Sukuk today depends less on the liquidity of the GCC alone than on the ability to build a multi-regional investor syndicate.
In practice, beyond Islamic banks and Gulf funds, the investor categories with which we collaborate (or which we actively target) are global ESG funds (Europe, Nordic countries, Canada). They are interested in African Sukuk because there is a strong correlation between Islamic finance and ESG principles (real assets, prohibition of controversial activities), and they are looking for measurable impact and a growing interest in green investments. Their perspective isn’t religious, it’s extra-financial. They want the ability to exit in case of market stress—even if their investment horizon is long. Private credit and infrastructure debt funds (Europe, US) are very pragmatic players. They view Sukuk as a structured instrument with an attractive yield. Regarding exit, they are less dependent on the secondary market. They often structure their investments to hold until maturity. However, they demand a liquidity premium if the secondary market is limited.
Asian institutional investors (Malaysia, Indonesia and Singapore) are very familiar with Sukuk and their approach is technical; they are sensitive to the reputation of the Sharia Board, doctrinal consistency (AAOIFI), and international ratings. They primarily consider political stability, guarantees, and the legal structure. Secondary liquidity is less critical for them, but the quality of the sponsor is a determining factor.
A successful African Sukuk today is no longer solely a GCC product nor a purely religious one. It must be ESG compliant, legally robust, sufficiently large to be liquid, structured with a quasi-bond logic, and narratively positioned as genuine asset financing.
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- Innovation in African Islamic Capital Markets:
Where do you see the most pressing need for innovation: in creating short-term liquidity instruments(e.g., Islamic commercial paper) for African corporates, developing risk-sharing Sukukfor startups and VC, or integrating blockchain for transparency in asset-backed issuances?
Answer
This is a strategic question—because it forces us to choose between immediate impact, structural transformation, and technological innovation.
If I had to prioritize based on urgency and the likelihood of actual adoption in Africa–GCC:
- Short-term liquidity instruments (immediate priority)
- Risk-sharing sukuk (structural but gradual priority)
- Blockchain (optimization tool, not a fundamental need)
Let me explain
1- Islamic Short-Term Liquidity Instruments
Today, the main obstacle to the development of African Sukuk is not the long term. It is the lack of a short-term liquidity ecosystem. African companies, even sound ones, need working capital, short-term refinancing, and active cash management. However, there are very few Islamic commercial paper, short-term corporate Sukuk, flexible Islamic EMTN programs, and regional Sharia-compliant money markets.
As a result: Buy-and-hold investors tie up capital, Islamic banks in the GCC lack liquid African assets, and African companies remain dependent on conventional bank credit.
2- Risk-sharing Sukuk (startups, VCs, SMEs)
Conceptually, this is the innovation most aligned with Islamic finance, namely Musharaka, Mudaraba, and equity-like Sukuk; however, in practice, it is the most challenging.
Risk-sharing Sukuk are suitable for productive infrastructure, agribusiness, renewable energy, and structured SMEs. It is a strategic undertaking, but not the most urgent.
3- Blockchain and tokenization are very interesting… but not a priority.
Blockchain can improve asset traceability, reduce issuance costs, increase transparency, and fractionalize Sukuk. The problem with African Sukuk is institutional and structural, not technological.
Regulatory bodies accept tokenization. Otherwise, it remains an amplifier, not an engine. In short, the most urgent need is not spectacular innovation, but structural innovation. Therefore, a true Islamic liquidity ecosystem for Africa and the GCC must be created because a deep market is born first and foremost from liquidity, not sophistication.
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- Legal & Regulatory Enablers for Africa:
Based on your accreditation as a Trade Finance Executive for African countries, what single regulatory reformin a key African financial hub (e.g., Casablanca, Johannesburg, Lagos) or in a center like London would most effectively spur Sukuk issuance for intra-African trade and project finance?
Answer
If I had to choose just one high-leverage reform, it would be the following:
Introduce complete legal and fiscal neutrality of Sukuk, backed by explicit recognition of “true sale” and SPV structures, in a pivotal African financial center (Casablanca or Johannesburg), with the possibility of issuance under English law.
Why this rather than a sectoral or technological reform?
Because 80% of the current friction is legal and fiscal, not religious or even financial. The problem today is structural when it comes to financing intra-African trade, logistics corridors, and regional energy projects. Sukuk necessarily involve asset transfers, the creation of a special purpose vehicle (SPV), leasing/buyback agreements, and multiple contracts. In several African jurisdictions, this leads to additional registration fees, VAT or transfer taxes, uncertainty about the validity of the true sale, and difficulties in enforcement in case of default. The result is that Sukuk become more expensive than a conventional bond—not because of the market, but because of the legal framework.
The most effective single reform
1- Complete tax neutrality through the adoption of a simple principle: A Sukuk issue must be fiscally treated as an equivalent conventional obligation. Concretely, Exemption from transfer taxes on transfers of assets linked to a Sukuk and VAT neutrality on Ijara / Istisna’a operations
2- Legal recognition of “true sale” and SPVs: A law or amendment is needed that recognizes the validity of the transfer of assets to the SPV, allows international arbitration.
Why Casablanca or Johannesburg?
Casablanca is a gateway to West and Francophone Africa, a natural location for Islamic finance, and a bridge between Africa and Europe.
Johannesburg, on the other hand, boasts a sophisticated financial infrastructure with a deep bond market and high technical capacity.
If one of these centers creates a clear, stable, and competitive framework, it will become the issuance hub for intra-African trade. This will allow companies to issue bonds regionally rather than in London or Dubai, and will also increase the confidence of GCC investors.
Why would this reform specifically stimulate intra-African trade?
Because trade finance requires short-term and flexible instruments, rapid refinancing, securitization of trade assets, and Sukuk backed by trade receivables. Without fiscal neutrality and clear recognition of asset transfers, these structures become impractical.
London is already well advanced, with established fiscal neutrality, recognized English law, and experience in issuing sovereign Sukuk. However, London will not directly stimulate intra-African trade. An African hub with a harmonized framework would have a systemic regional multiplier effect. A well-calibrated, one-off reform would allow for an immediate reduction in structuring costs, increased participation from international investors, standardized documentation, the creation of an African Islamic yield curve, and the development of a local secondary market. Most importantly, it would facilitate a shift from one-off issuances to a recurring market.
In Strategic Conclusion, if the goal is to stimulate Sukuk for intra-African trade, infrastructure projects, and regional integration, the most powerful reform is neither technological nor doctrinal; it is the fiscal neutrality and legal certainty of Sukuk structures in a major African hub, because legal confidence always precedes liquidity.
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- The Natural Convergence: Sukuk, ESG, and Impact:
The ethical principles of Islamic finance align closely with ESG. How can Sukuk be strategically positioned to capture a larger share of the global green and social finance agendaspecifically for African renewable energy, sustainable agriculture, or social infrastructure projects?
Answer –
Excellent question and a strategic one.
Sukuk have a natural comparative advantage in the green and social economy, but this advantage remains underutilized. To capture a larger share of the global sustainable finance market (which now exceeds trillions of USD), it is necessary to shift from a purely religious positioning to a systemic ESG + impact + real asset positioning.
Here’s how.
1- Understanding the Structural Advantage of Sukuk
Sukuk are based on backing by a real asset, the prohibition of harmful activities, risk sharing, and the exclusion of excessive speculation. This creates a natural alignment with ESG principles, the Sustainable Development Goals (SDGs), and impact finance.
In Africa, where the needs include renewable energy, water and sustainable agriculture, health and education, and basic infrastructure, the Sukuk is conceptually more coherent than a “general” bond. But the theoretical advantage is not enough.
2- Moving from a “Green Sukuk” to a “Green Asset-Backed Investment Story”
To capture the global market, Sukuk must be aligned with dominant standards, meaning formal alignment with international frameworks; a Green Sukuk must be doubly certified: Sharia + ESG.
3- Priority given to African sectors with strong climate credibility
Certain sectors offer powerful and credible storytelling:
– Renewable energies, which include utility-scale solar power, rural mini-grids, energy storage, and regional interconnections with contractual cash flows (PPAs), making them bankable.
– Sustainable agriculture, which includes efficient irrigation, agribusiness value chains, and green logistics infrastructure, thus offering the possibility of structuring Sukuk bonds backed by productive agricultural assets.
– Social infrastructure, which includes hospitals, schools, and social housing with social Sukuk bonds aligned with SDGs 3, 4, and 11.
4- Reduce the Africa premium via blended finance
To attract large global ESG funds, ADB/IFC/IsDB Partial Guarantees are required, the First-loss tranche absorbed by a development institution, and FX Hedging Mechanisms; This transforms an “emerging” project into an investable asset. An African Green Sukuk rated BBB- with partial guarantee completely changes the depth of demand.
5- Developing standardization and critical mass
Global ESG investors require a size ≥ USD 500M, detailed annual reporting, measurable impact (CO₂ avoided, Mega Watts installed, hectares irrigated) and independent audits.
6- Strategic narrative positioning
The discourse must evolve because Sukuk are not a religious niche but rather a natural tool for financing the energy transition and inclusive development.
7- Possible innovation: Sustainability-Linked Sukuk
Beyond classic Green Sukuk, a coupon adjusted according to ESG indicators is needed, namely KPIs related to access to electricity, KPIs related to emissions reduction, KPIs related to rural inclusion, as this attracts dynamic ESG funds.
8- Integrating digital transparency
Blockchain is not a priority for the global market, but it can strengthen the traceability of green assets, publish environmental impact in real time and reduce the risk of greenwashing; for European investors, the credibility of the impact is key.
9- Geographic Distribution Strategy
An African green Sukuk should ideally be structured more on a diversified basis to ensure ample liquidity. The global green finance market seeks tangible assets, yields exceeding those of European sovereigns, and a measurable impact.
Africa offers the world’s greatest solar potential, a massive social infrastructure deficit, and a dynamic population. Sukuk are the most consistent tool for transforming this potential into an investable asset.
To capture a larger share of the global sustainable market, African Sukuk must:
– Be formally aligned with international ESG standards
– Achieve critical mass and credible liquidity
– Integrate multilateral safeguards
– Measure and publish impact rigorously
– Be positioned as global, not EU-specific, instruments
The convergence of ESG and Islamic finance is not marketing; it is structural, and if properly structured, Africa can become the global laboratory for Green Sukuk with real impact.
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- Risk Assessment in Cross-Border Sukuk:
From your vantage point, what unique risks—such as asset tangibility verificationacross borders, legal enforceabilityin different African jurisdictions, or currency risk—do your GCC institutional partners most frequently highlight? How are you structuring deals to mitigate these?
Answer–
That’s an excellent question because it touches on precisely the points where the GCC investment committees become very technical when it comes to Africa. In practice, their concerns aren’t theoretical. They’re legal, operational, and macro-financial.
I would group the risks they most often raise into five categories, and then explain how we structure our approach to mitigate them.
1- Risk of legal validity and enforcement
What they systematically ask:
Is the “true sale” enforceable in the event of insolvency?
Is the SPV protected against the originator’s bankruptcy?
Are the security interests enforceable?
Is the local court reliable?
Can arbitration be conducted in London, under the DIFC or LCIA?
This is often the number one risk. In some African jurisdictions, there is an absence of case law on Islamic finance, a civil law incompatible with certain trust mechanisms, and uncertainty about the assignment of future receivables. We structure with the objective of isolating local risk as much as possible by setting up an offshore Special Purpose Vehicle/SPV (often in a recognized jurisdiction), documentation in English law, international arbitration (LCIA, ICC, DIFC) and multiple legal opinions (local + international) with solid step-in rights clauses.
2- Risk of Actual Tangibility of Assets
GCC investors are very sensitive to the question, “Does the asset actually exist and is it transferable?”
Their concern is whether the asset is fictitious or purely contractual, whether the asset is legally non-transferable, whether there is difficulty in seizing it in the event of default, or whether it is physically located in an unstable jurisdiction.
The key response is independent technical due diligence, a third-party valuation report, formal asset registration where possible, Istisna’a → Ijara structuring for construction, and additional collateralization (escrow, offshore accounts). When physical assets are difficult to mobilize, we prioritize securing the cash flow.
3- Foreign exchange risk (FX risk)
This is the most frequently cited macroeconomic risk, stemming from concerns about rapid currency depreciation, capital controls, and transfer restrictions.
Mitigation
Several mechanisms are in place since, without a credible solution on FX, pricing deteriorates sharply; they are as follows: USD indexed revenues (e.g., energy PPAs), offshore account directly funded in foreign currency, multilateral guarantee against convertibility risk, FX hedging mechanisms whenavailable, cash sweep and debt service reserves (DSRA).
4- Sovereign and political risk
Country risk is omnipresent, and investors are asking whether the sovereign guarantee is explicit or implicit, whether stability is regulatory, what is the history of respecting commitments, and what is the exposure to political cycles?
Typical Structure
The presence of a multilateral lender can significantly reduce the spread.
Partial guarantee from the AfDB/IFC/ISDB.
Political risk insurance.
Stabilization of clauses in PPPs.
Secure payments via out-of-jurisdiction accounts.
In practice, investment committees classify risks as follows:
– Legal validity and execution
– Foreign exchange risk
– Security of cash flows
– Actual tangibleness of the asset
– Security of secondary liquidity
Sharia compliance is rarely the main obstacle if the structure is standard.
Comprehensive Structuring Approach
Our approach is to shift the center of gravity of risk from a physical asset that is difficult to mobilize to a secure and isolated financial flow. In short, we don’t eliminate risk in Africa; we manage it contractually and legally. Institutional investors in the GCC don’t have a problem with Africa itself; they have a problem with legal uncertainty, exchange rate risk, and enforcement in the event of default. When a structure offers predictable cash flows, international legal security, credible FX protection, and verifiable real assets, everything runs smoothly.
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- Talent & Ecosystem Development:
You are certified in entrepreneurship support. What is the bigger gap for growing the African Islamic capital market: a shortage of Shariah-compliant structurerswith investment banking skills, or a lack of local financial engineerswithin Africa who understand both Sukuk and the continent’s project ecosystem?
Answer
A much nuanced question and a strategic one for the future of the ecosystem.
If I had to answer directly, the main obstacle isn’t the scarcity of Sharia scholars.
It’s the lack of local financial engineers capable of structuring Sukuk bonds adapted to African realities.
Let me explain.
1- Sharia Scholars and Structurers: A Real… But Not Critical Issue
Today, there are recognized Sharia boards in the GCC, and specialized firms in London, Kuala Lumpur, Bahrain, etc. Certainly, doctrinal expertise is relatively accessible, but they are few in number in sub-Saharan Africa, and this is not the real bottleneck. In 90% of African transactions, Sharia validation can be imported, opinions can be obtained internationally, and AAOIFI standards are available. The constraint is therefore not theological.
2- The real gap: hybrid financial engineering
What is truly lacking is a rare profile: a structurer who understands Sukuk (Ijara, Istisna’a, Musharaka, etc.), African project finance, local PPPs, political risks, regulatory and fiscal realities, and the expectations of GCC investors. This profile is extremely rare.
3- Why is this deficiency more critical?
Because the African market is legally fragmented, fiscally heterogeneous, politically volatile, and monetaryly unstable. A Sukuk simply copied from the Gulf doesn’t work. The structure must be adapted to local law, and the flows must be secured, guarantees provided, FX mechanisms implemented, and appropriate documentation required.
Without this local capacity, we see overly complex structures, excessive costs, and transactions that fail during execution.
4- The Impact on Entrepreneurship
In supporting SMEs and startups, the problem is even more apparent.
African entrepreneurs need flexible Islamic financing instruments, products adapted to smaller businesses, and simplified structures; however, major international banks do not operate at these sizes. Sharia boards are not the issue.
The lack of local infrastructure is. Without local financial engineering, GCC capital remains concentrated on sovereign wealth funds, large-scale projects, and heavy infrastructure, and does not flow into the real entrepreneurial economy.
5- Why the Expertise Must Be African
A structurer based in London or Dubai can design a Sukuk. But only a locally rooted professional understands the administrative dynamics, execution risks, regulatory deadlines, field constraints, and informal market realities because Islamic finance requires a connection to the actual asset.
The actual asset is in Africa, therefore the engineering must be as well.
6- The risk if nothing changes
If this deficit persists, Africa will remain a market for one-off issuances. Sukuk will remain sovereign and not entrepreneurial. The market will remain dependent on imported expertise, and costs will remain high. The organic development of a capital market requires a local core.
7- What should be prioritized?
Advanced training programs in Sukuk structuring and project finance
Islamic finance incubators in hubs like Casablanca, Lagos, and Nairobi
Partnerships between GCC banks and local teams
Exposure of young African bankers to international Sukuk desks
This isn’t a religious issue; it’s a hybrid skillset.
To summarize, I can say that between a shortage of Sharia structuring experts and a lack of local financial engineers proficient in Sukuk and African projects, the latter is clearly more critical. Scholars can validate a structure, but only local financial engineers can make it viable. And without technical viability, the market cannot develop.
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- The Decade Ahead: A Vision for Systemic Integration:
For Sukuk to become a systemically important tool for African development financeover the next 10 years, what three things must happen? (e.g., a pan-African Shariah governance board, a flagship liquid benchmark sovereign Sukuk, integration with AfCFTA trade settlement systems).
Answer–
For them to move from one-off instruments to a systemic tool for financing development in Africa, we must act on three structural, complementary and mutually reinforcing levers. I analyze each of these levers from the aspects of “why”, “function” and “systemic aspect”.
1- Creation of a Pan-African Sharia Governance and Standardization Hub
Why?
African Sukuk today suffer from doctrinal fragmentation: each country where the transaction involves a different Sharia board increases complexity and cost. International investors want predictability and recognized compliance.
Function!
A pan-African authority could: Issue uniform opinions and standards for Islamic finance in Africa, Harmonize Ijara, Istisna’a, Musharaka practices for PPP and infrastructure, Serve as a “credible label” to attract global GCC and ESG funds.
Systemic impact!
Reduction of legal and doctrinal friction, facilitation of cross-border transactions and creation of a continental brand of trust for the Sukuk market.
2- Issuance of a flagship, liquid, and benchmarkable sovereign sukuk
Why?
The African market currently lacks a benchmark instrument. Institutional investors in the GCC and global ESG funds want critical mass (\u003e USD 500M), an international listing, and transparent and secure cash flows.
Function!
It serves as an anchor point for corporate and PPP Sukuk spreads. It allows private and subnational issuers to align with a credible benchmark, improves secondary liquidity, and creates an African yield curve.
Systemic impact!
This includes increased market depth, a reduction in the perceived risk premium on African Sukuk, and encouragement of international investor participation.
3- Integration with pan-African trade and financial settlement systems (AfCFTA and others)
Why?
Intra-African trade financing is limited by the lack of liquid cross-border instruments, settlement and clearing difficulties, and a lack of visibility on backed trade assets.
Function!
Coupling Sukuk with AfCFTA logistics and financial networks allows for Sukuk backed by real trade flows, secure payments and transfers between countries, a reduction in counterparty and exchange rate risk, and transparency and traceability for GCC and ESG investors.
Systemic impact!
Transforming Sukuk into a tool for financing regional trade and infrastructure will lead to increased real-world use and transaction volume, and prepare the way for tokenization and digital traceability (blockchain) in the future.
The conclusion is together, these three measures would create a self-reinforcing ecosystem: the Sharia hub standardizes the structure, the sovereign benchmark generates liquidity, and integration with the AfCFTA gives Sukuk an active role in the real economy.