South Africa all set to introduce Islamic Bonds

Johannesburg: Plans by South Africa’s National Treasury to introduce Islamic bonds are gaining a strong support in the African country, amid expectations the move would help boost the state’s economy.

"I am sure this was at the request of those Middle Eastern countries because SA has a small Muslim population,” Kokkie Kooyman, head of Sanlam Investment Management told Fin24.

The National Treasury has announced plans to introduce Islamic bonds as part of efforts to get a share of the booming Islamic banking industry.

Other financial instruments planned by the Treasury include Mudarabah, a form of investment partnership between banks and businesses that shares the risk and losses.

There is also Murabah, a transaction in which the bank buys the asset then immediately sells it to the customer at a pre-agreed higher price payable by installments.

The Sharia-compliant Islamic finance is not new to South Africa with different banks and investment companies offering these products. Several banks as the First National Bank and ABSA bank offer Sharia-compliant services.

Kooyman said the Sharia-compliant offerings are worth pursuing because the end result or return is the same as that of conventional banks.

"The returns are also not much different for ordinary investors,” he said. (...)