Tokyo: The Japan International Cooperation Agency (JICA) and the government of Jordan will begin work in the coming weeks on a debut issuance of Islamic bonds (sukuk), an official of the aid agency said.
The role of JICA could be crucial for aid-dependent Jordan which is under pressure to cut public debt in the face of a large Syrian refugee influx and mounting security costs.
Jordan passed a long-awaited law in 2012 that allowed the government to raise funds via sukuk, which are investment certificates that follow religious guidelines such as bans on interest and monetary speculation.
No issue materialised subsequently but growing demand for sharia-compliant funding tools among Muslim-majority countries where JICA is active prompted Jordan’s ministry of finance to seek its assistance to issue sukuk.
In October, JICA signed an agreement with the Islamic Corporation for the Development of the Private Sector (ICD), a unit of the Islamic Development Bank, to develop its Islamic finance capability.
“Jordan is our first target. JICA and ICD will start our joint technical assistance to the country within a month,” Tetsutaro Kon, director in charge of Middle East operations at JICA, told Reuters.
The consultation would continue over the next six months and address details such as currency and tenor of the sukuk.
JICA has traditionally provided grants and concessionary loans in markets like Iraq and Palestine, but relatively higher-income countries want to supplement and diversify their funding sources, including via Islamic finance, he said.
“For the other countries, some discussions are ongoing but these are yet to be concrete.” JICA, rated AA- by Standard & Poor’s, is an active issuer of yen-denominated bonds in the Japanese market, but the agency currently has no plans to issue a sukuk of its own.
