In its largest foray into Islamic finance, the Africa Finance Corporation has issued a $150 million sukuk, or Sharia-compliant financial product.
The AFC, a Nigeria-based pan-African finance institution, saw its initial fundraising target of $100 million oversubscribed, drawing a final book order of about $230 million, the organisation said.
Andrew Alli, president and chief executive of the AFC, said the sukuk offers investors the opportunity to be involved in “high-impact infrastructure projects that not only promote social and economic development across Africa but also generate economic returns” for investors. He called the sukuk a “milestone in [AFC’s] financing activities” that would allow the group to diversify its funding sources.
The murabaha sukuk has a three-year tenor, maturing on 24 January 2020, and has been rated A3 by Moody’s. Emirates NBD Capital will act as the sole global coordinator and, along with Mitsubishi UFJ Financial Group and Rand Merchant Bank, as joint bookrunner and lead manager.
The use of sukuk, which complies with Islam’s prohibition against interest, has been cited as having the potential to boost Africa’s underfunded infrastructure system. But sukuk remains underutilised in Africa; as of September 2016, the continent’s entire sukuk market was worth just $2 billion, according to a Standard & Poor’s report released last year.
AFC’s maiden sukuk is the first to be issued by an African supranational organisation, according to the corporation. It is the firm’s second venture into Islamic finance: in 2015, AFC received a $50 million, 15-year line of financing from the Islamic Development Bank to fund projects in African IDB member countries.