Colombo bourse to include sukuk products by end-May

• SEC appoints six Shariah scholars as supplementary service providers

By Nishel Fernando 

The Colombo Stock Exchange (CSE) said that efforts are being actively rolled out to introduce sukuk products to the Sri Lankan capital market by the end of this month. 

A sukuk is an Islamic financial instrument, similar to conventional debt securities and is linked to an underlying asset (normally tangible). From the perspective of the investors, holding a sukuk represents partial ownership of the relevant asset.

“Rules are being drafted. Probably, we will be able introduce sukuk products to the market by the end of May,” CSE Chairman and First Capital Holdings PLC Managing Director and Chief Executive Officer Dilshan Wirasekara told Mirror Business. 

The CSE plans to introduce corporate sukuk in local currency by introducing requisite clauses to the existing listing framework of the CSE and corporate issuances in foreign currency that would adhere to the framework enabled for the local (Sri Lankan rupee) sukuk issuances, once the required legislation is in place.

The rules for introducing sukuk products were developed by the CSE, in accordance with the approved Regulatory Framework by the Securities Exchange Commission (SEC), in June 2023. 

Meanwhile, the SEC last month, at its 499th commission meeting, approved six Shariah scholars as supplementary service providers, under the SEC Act of 2021. According to a directive issued by the SEC last week, they are to play the role of certifying the Shariah compliance of Islamic capital market products to be listed on the CSE, as per the listing rules. 

The issue of sukuk products in various jurisdictions over the world has grown rapidly during the past few years, giving proof of the popularity of the product. 

The introduction of the sukuk products at the CSE is expected to broaden the product offering and open up new avenues for attracting the much-needed foreign funds to the Sri Lankan capital market and be a catalyst towards the growth of Sri Lanka’s economy.

“Sri Lanka would be able to tap into the much-needed foreign funds and source it for development goals through the capital market framework,” the CSE said.

The SEC approved in principle the introduction of Islamic capital market products to the Sri Lankan capital market in June 2021.