Egypt’s cabinet on Wednesday approved a draft law on the issuance of Islamic bonds by the finance ministry and state-run administrative bodies, the State Information Service has reported.
The draft law will be referred to parliament before it officially passes into law.
Islamic bonds are similar to ordinary government treasury bills and foreign currency denominated bonds but are in compliance with Islamic sharia law.
New sectors, such as individual and investment funds, will now be able to lend money to the government through this financial tool (sukuk).
Because the traditional Western interest paying bond structure is not permissible under sharia law, the issuer of a sukuk sells an investor the certificate, who then rents it back to the issuer for a pre-determined rental fee. The issuer of the sukuk also makes a contractual promise to buy it back at a future date at par value.
According to the draft law, which has been published by Egypt's Tahrir newspaper, Islamic bonds will be listed and traded on domestic and global markets.