Interstan Securities Issues an Actively Managed Certificate on Islamic principles

As was announced earlier, Interstan Securities arranged the first issue of Islamic certificates (sukuk) in Kyrgyzstan in May 20231, becoming the first investment firm to use the legislation enabling the issue of Shari’ah-compliant securities in the Kyrgyz Republic. The first issue was in the format of Sukuk Al-Mudarabah, to finance the trading business of one of our investment clients.

Now we are proud to announce that we have issued the type of Islamic security which is widely accepted as a uniquely flexible asset management tool – the Investment Agency Sukuk, or Sukuk Al Wakala Bi Al Istithmar. In European issuance practice this type of security is known as the Actively Managed Certificate; it is very popular in Switzerland and several other asset management hubs as a flexible alternative to launching an investment fund.

The Originator in the Investment Agency Sukuk is not the entity seeking to finance its own business through the securities issue, but the professional asset manager that raises assets under management through the issue of Sukuk.

The principal difference between the Investment Agency Sukuk and non-Islamic securities linked to an actively managed underlying is that the underlying of the Sukuk must be managed in a Shari’ah-compliant manner. This excludes investment into fixed-income instruments, buying derivative instruments for the sake of speculation rather than hedging, and supplying capital to investments which are forbidden in Shari’ah (haram). Otherwise, an Investment Agency Sukuk is a perfectly flexible instrument allowing investment firms to raise funds under management from a wide range of investors.

The issuer of our pioneer Investment Agency Sukuk is a Kyrgyzstan-incorporated SPV – Interstan Global Investments, Special Islamic Finance Company LLC, while the Originator is our investment firm proper – Interstan Securities LLC, acting under its asset management license.

The size of the issue is 4,000,000,000 Soms (roughly, 45 million USD); it is to be marketed to qualified investors only.

As with the previous issue of Sukuk arranged by Interstan Securities, the legal advisor and documentation developer for the issue is the Swiss-based global securities issuance service firm John Tiner & Partners. This firm has been responsible for drafting key pieces of securities-related legislation in the Kyrgyz Republic.

The securities are expected to be listed on The Stock Exchange of Kyrgyzstan – BTS.