The Libya Africa Investment Portfolio (LAIP) is exploring the use of Islamic / Sharia-compliant bonds, known as Sukuks, to finance a new wave of development projects inside Libya.
The announcement followed an extensive roundtable discussion on project financing held on 27 August, attended by top executives, regulators, and financial experts. If approved, the plan could mark a major shift in how Libya attracts investment for national reconstruction.
High-Level Meeting Signals a Policy Shift
The meeting brought together senior figures from across Libya’s financial ecosystem. Participants included the LAIP Chairman and General Manager, department directors, the Chairman of the Stock Market Authority and two of its senior officials, as well as representatives from the Islamic Development Bank, the Social Solidarity Fund, and other financial institutions.
Their shared objective was clear: to identify innovative, credible financing instruments that can fund projects in Libya without breaching Islamic finance principles.
Why Sukuk Financing Matters
Islamic bonds—or Sukuks—differ from conventional bonds in that they are asset-backed and comply with Sharia law, prohibiting interest-based lending. Instead, investors earn returns from profit-sharing or lease-based arrangements tied to tangible assets.
For Libya, adopting Sukuk financing could achieve several goals at once:
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Diversify funding sources beyond oil revenues and sovereign debt.
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Attract Gulf and North African investors who prefer Islamic-compliant instruments.
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Rebuild confidence among regional capital markets by showcasing transparency and structure.
Moreover, Sukuks are widely viewed as stable and ethical instruments—features that appeal to both institutional investors and development funds.
Sukuk Structure: The Role of a Special Purpose Vehicle
According to discussion notes, LAIP intends to issue the Sukuks through a Special Purpose Vehicle (SPV) created specifically for this purpose.
This structure would isolate project risk, ensure compliance with Sharia standards, and provide investors with clearer claims on revenue-generating assets. Using an SPV also enables cross-border participation from Islamic banks and funds, potentially positioning Libya within the broader pan-African Sukuk market, which has grown rapidly in Nigeria, Egypt, and South Africa.
Broader Investment Context
The timing of LAIP’s initiative is significant. As Libya rebuilds after years of conflict, access to diversified capital is critical for infrastructure, housing, and energy development. International investors have shown renewed interest in North Africa’s frontier markets, particularly those integrating Islamic finance frameworks into national planning.
If implemented successfully, Libya’s Sukuk program could become a model for post-conflict economies seeking sustainable, values-driven investment mechanisms.
Next Steps
The roundtable concluded with an agreement to conduct a detailed feasibility study on Sukuk issuance, examining regulatory requirements, investor appetite, and coordination with Libya’s Stock Market Authority and central financial bodies.
Further consultations with the Islamic Development Bank are expected in the coming months. Once approved, the Sukuk could finance projects ranging from renewable energy and agriculture to housing and logistics infrastructure.
Why This Matters for Investors
For investors focused on emerging African markets, the LAIP’s move signals that Libya is reopening its financial channels and aligning them with international standards. Sukuk issuance would provide both a safe investment structure and a tangible role in Libya’s reconstruction.
It also underscores a wider continental shift: African sovereign funds and development agencies are increasingly turning to Islamic finance as a source of long-term, patient capital.
