Tanzania’s first Islamic bond is oversubscribed

Tanzania recently saw its first Sukuk bond, known as the Islamic bond, being oversubscribed, showcasing the high investor appetite for diverse investment opportunities in the region. The maiden Sukuk bond issuance in Tanzania was a significant milestone, and FIMCO CEO Ivan Tarimo joined CNBC Africa to provide insights into this historic event. The bond was facilitated by FIMCO, making it a momentous occasion for the company. Tarimo expressed gratitude for the successful issuance, emphasizing that while it may not have been a large transaction, it held immense significance for the market. He highlighted Tanzania's demographic balance, with nearly equal populations of Christians and Muslims, providing a fertile ground for Sharia-compliant financial products like Sukuk bonds. The nation's business landscape, with a significant portion of informal cash flow, further fueled the demand for ethical financial instruments among the underserved business community. Explaining the concept of Sukuk bonds, Tarimo likened them to certificates or IOUs that investors receive in exchange for their investment. The funds raised through the Sukuk issuance are channeled into businesses, in this case, Eman Finance Limited, which uses the capital to finance local enterprises. The profits generated from these ventures are then distributed back to the Sukuk holders, offering a sustainable and ethical investment model. The successful oversubscription of the Sukuk bond highlighted the diverse investor base attracted by the offering. Institutional investors, including Sharia-compliant banks, retail investors, high-net-worth individuals, and small businesses, all participated in the issuance, underscoring the broad appeal of ethical financial products in Tanzania's market. Eman Finance, classified as a tier two financial institution, demonstrated remarkable innovation with the Sukuk issuance, bridging the gap typically associated with tier one banks. By successfully implementing this pioneering financial instrument, Eman Finance showcased its ability to grow and meet the increasing credit demand in the market. Tarimo noted that such initiatives could pave the way for other financial players to follow suit, further expanding the market for ethical financial products. Regarding the green shoe option, which allows for additional shares to be issued in case of oversubscription, Eman Finance exercised this option, indicating strong market demand and confidence in the offering. The successful outcome of the Sukuk bond issuance sets a positive precedent for future issuances on the Dar es Salaam Stock Exchange, with regulatory authorities and central banks showing support for such initiatives. As part of the facilitation process, FIMCO played a crucial role in bringing this landmark event to fruition. Tarimo highlighted the company's commitment to pioneering innovative financial solutions and expressed optimism about future opportunities in the market. He credited the collaborative efforts of stakeholders, including regulators and industry participants, for the success of the Sukuk bond issuance and hinted at potential future endeavors. In conclusion, the oversubscription of Tanzania's first Sukuk bond reflects the growing demand for ethical financial products in the region and signals a positive outlook for the market. The successful collaboration between Eman Finance, FIMCO, and other key stakeholders sets the stage for further innovation and growth in Tanzania's financial sector.