Unlocking Sustainable Finance: UNDP's Support for Zanzibar's Sovereign SUKUK Bond

June 2, 2023
The United Nations Development Programme (UNDP) and the Revolution Government of Zanzibar (RGoZ) are joining forces to explore alternative financing avenues for the realization of Zanzibar's development plans. As part of this endeavor, the RGoZ has sought the UNDP's support in issuing a Sovereign SUKUK Bond, a prominent Islamic finance instrument. The first inception workshop, convened by the UNDP, brought together key stakeholders to develop a robust legal framework and build capacity for the successful issuance of the SUKUK Bond. This collaborative effort aims to unlock sustainable finance, foster inclusive growth, and propel Zanzibar towards its development goals, creating a prosperous future.

The Revolution Government of Zanzibar (RGoZ) has set its sights on achieving its development plans, known as Zanzibar Development Plan (ZADEP), and Vision 2050. Recognizing the need for alternative financing instruments, the President's Office of Finance and Planning (POFP) approached UNDP for assistance in issuing a Sovereign SUKUK Bond.

These bonds, widely used in Islamic finance, offer an opportunity to diversify the investor base and attract new sources of funding. However, the issuance process necessitates a comprehensive legal framework that aligns with Islamic principles and addresses operational considerations. Non-Islamic jurisdictions like Zanzibar face the challenge of developing a legal framework that caters to Islamic finance principles while accommodating their unique circumstances.

The Workshop: 
In a pivotal workshop organized by the UNDP, high-level stakeholders from the Zanzibari government and financial sectors came together to explore the potential of issuing a Sovereign SUKUK Bond. The workshop aimed to unlock sustainable finance and enable inclusive growth in Zanzibar.

The discussions commenced with a comprehensive exploration of the global SUKUK market, examining its growth, dynamics, and successful experiences from various countries. Participants gained valuable insights into the instruments, definitions, historical context, and the linkages between SUKUK bonds and the Sustainable Development Goals (SDGs). These discussions set the stage for Zanzibar's exploration of SUKUK as a viable financing option. Emphasizing the importance of aligning the SUKUK Bond with sustainable development, the workshop underscored the bond's connection to Zanzibar's development objectives. It also highlighted the significance of integrating the SUKUK Bond issuance within the broader framework of UNDP's flagship initiatives, such as the Integrated National Financing Framework (INFF).

Throughout the workshop, participants engaged in capacity-building sessions to enhance their understanding of SUKUK instruments, the legal framework requirements, and the potential impact on Zanzibar's development goals. The discussions centered on establishing a clear roadmap for Zanzibar's SUKUK Bond issuance, including considerations for asset utilization, impact reporting, and engaging international investor.

The workshop showcased UNDP's commitment to supporting Zanzibar in unlocking sustainable finance. Leveraging its expertise and global network, UNDP provided technical guidance, financial support, and access to international partners, such as Citi Bank and the Islamic Development Bank. 


Looking Forward: 
The workshop marked a significant step forward for Zanzibar's economic development and sustainable finance agenda. In partnership with the Revolutionary Government of Zanzibar we are poised to establish a robust legal framework that harnesses the potential of the SUKUK Bond to attract diverse investors and mobilize resources for inclusive growth.

Our ongoing support extends beyond the workshop, encompassing capacity building, policy advisory services, and facilitation of access to guarantees. By unlocking sustainable finance, we believe that Zanzibar can pave the way for impactful investments in key sectors, aligning with the SDGs and promoting long-term socio-economic development.

As Zanzibar progresses on its journey to issue the Sovereign SUKUK Bond, it sets an inspiring example for other regions seeking to harness the power of Islamic finance and unlock sustainable finance for inclusive growth. Through continued collaboration with the Revolutionary Government of Zanzibar and its ministries, we are confident that Zanzibar will realize its development plans and create a prosperous future for its people.