The Cabinet during its meeting Wednesday approved in principle a draft law on sovereign Islamic bonds and decided it would be reviewed by the government’s legislative committee in preparation for submission to the legislative authority.

The proposed law regulates the provisions and procedures for issuing Islamic bonds, or sukuk, and determines financing, leasing and investment instruments.

The law also regulates the authority that would issue and manage these bonds, and states that a special fund shall be established and financed by the owners of these instruments.

The Egyptian Financial Supervisory Authority announced plans for drafting a similar law in early December to finance private sector Islamic bonds.

Since President Mohamed Morsy assumed office in June, there have been predictions that the government would introduce Islam-friendly financial instruments.

The capital market law, issued in 1992, allows the use of Islamic bonds, and the EFSA says the draft law would expand their use.

Edited translation from Al-Masry Al-Youm