While Gambia is an old hand in the Islamic bond market, issuing regular short-term sukuk almost weekly, it has yet to stretch for longer tenors.
Osun was the first state in Nigeria to issue sukuk and gained some international attention with a relatively substantial deal of $62 million over seven years, but it is not a sovereign.
Other Islamic countries such as Morocco and Egypt and the most developed economy on the continent, South Africa, have been slower off the mark and are yet to issue sukuk. Senegal has beaten them to the punch.
Meanwhile, potential issuers are watching Senegal closely to see what can be learnt from its debut. The country has set a precedent and there is a strong sense that it wants to become the regional hub for Islamic finance.
With a large infrastructure deficit, it is in desperate need of new funds and Islamic finance is one way of making ends meet. The sukuk market is far from saturated, Senegal has an attractive coupon, and being a first mover is an advantage.
Portraying itself as an Islamic finance hub when regulatory backing does not exist puts it in a tricky position
Could some investors be more likely to buy better developed, perhaps more reliable sovereign issues that come hot on Senegal’s heels? If this turns out to be the case, Senegal could lose out.
Moreover, many of these countries already have regulatory frameworks in place to support the growth of Islamic finance. Senegal doesn’t as yet. Portraying itself as an Islamic finance hub when regulatory backing does not exist puts it in a tricky position.
Sukuk and Islamic finance should be a means to diversify the country’s capital raising channels, not a reason to become an Islamic finance hub just for the sake of it.
Focusing solely on this objective, and marketing this way, will not work for a country with such great funding needs. Doing so might limit the number of new investors into the country rather than broaden it.