Sachsen-Anhalt plans 100m euro Islamic bond

You might expect the first Islamic bond in Europe to be placed in London. But there are still other innovative locations around: Sachsen-Anhalt, a federal state of Germany, is planning to be the first European issuer of Sukuk assisted by Citibank.

At first a placing of 100 million euros was being considered, but an increase in this sum is already in prospect as informal demand is high.

The federal state is going to establish a foundation in The Netherlands that will receive the usufruct comprising about 30 years of real estate belonging to financial authorities.

The foundation will then issue the Sukuk of a duration of five years. Afterwards the state can receive back the usufruct cost-free or a new issue of Sukuk would be placed.

In 2001 Sachsen-Anhalt succeeded in selling 50 million euros out of a one billion euro conventional bond issue in Bahrain. And this was the starting point for discussions about whether it would be possible and meaningful to start with a Sukuk from Germany.

Actually the idea led to detailed plans that now only need to be accepted by the state finance minister and the financial board of the parliament.

Axel Guehl, head of department of economic affairs in the Ministry of Finance, state Sachsen-Anhalt, looks for two benefits for this deal: The first is to broaden the investor based and to reduce financing costs but even more important is to make Sachsen-Anhalt known to investors who maybe interested to come to Germany.

The federal state offers therefore a variety of support to Arab investors and welcomes them. Mr. Guehl is also engaged in Ghorfa, the German-Arab Chamber of Commerce as treasurer.