Oct 14 (Reuters) - The Japan International Cooperation Agency (JICA) has signed an agreement with the private sector arm of the Islamic Development Bank to develop sharia-compliant transactions with a focus on sukuk (Islamic bonds).
JICA joins other development agencies such as the World Bank and the Asian Development Bank in building links with Islamic finance.
Sukuk, investment certificates which follow religious guidelines such as bans on interest and monetary speculation, have over the past year grown in prominence as a funding tool beyond the industry’s core markets of the Middle East and southeast Asia.
JICA’s agreement calls for efforts to develop Islamic money markets across the IDB’s 56 member countries, the Jeddah-based Islamic Corporation for the Development of the Private Sector said in a statement.
In June, Jordan’s ministry of finance asked for assistance from JICA in issuing sukuk, one of the Jordanian government’s objectives under a development programme with the World Bank.
Jordan is studying how to issue its first sukuk but pressure to cut public debt and a preference for concessionary loans from aid donor countries have hindered the plan.
JICA’s agreement will help raise awareness of Islamic finance and attract other Japanese lenders to the sector, Kunio Okamura, JICA’s senior special advisor, was quoted as saying in the statement.
Some Japanese banks are increasingly active in Islamic finance, though most of this is focused outside Japan; Sumitomo Mitsui Banking Corp and Bank of Tokyo-Mitsubishi UFJ have been expanding their Islamic businesses in Malaysia.
JICA is a regular bond issuer in Japan’s domestic market and could follow state-owned Japan Bank for International Cooperation in helping Muslim countries with capital-rasing efforts.
Last week, Tunisia issued a $825 million bond on the domestic Japanese market, guaranteed by the Japan Bank for International Cooperation, Tunisia’s third such bond since 2012. Tunisia is now preparing for its debut sovereign sukuk issue. (Editing by Andrew Torchia)