Uganda plans first sovereign sukuk to help finance US$3.2bn railway project

Uganda is preparing to issue its first sovereign sukuk, or Islamic bond, as part of efforts to finance a major railway project aimed at improving regional trade and transport links in East Africa.
The Uganda Ministry of Finance said Tuesday that the country was in advanced stages of arranging the sukuk issuance to support construction of the Standard Gauge Railway project.
The planned railway is estimated to cost about 2.7 billion euros (US$3.17 billion) and forms part of broader regional infrastructure plans intended to strengthen connectivity between East African economies.
According to the ministry, the sukuk is expected to finance around 15 percent of the project’s total cost.
The remaining funding is projected to come from export credit agencies, which are expected to cover 60 percent of the financing, while development finance institutions will provide the remaining 25 percent.
Ugandan authorities have not yet disclosed the final size or timing of the bond issuance, but officials said preparations were progressing ahead of a formal launch.
Patrick Ocailap is leading a regional roadshow in East Africa to assess investor appetite and support price discovery for the sukuk.
The delegation has been meeting potential investors and financial institutions in countries including Kenya and Tanzania.
Representatives from Stanbic Bank Group, Uganda’s central bank and the railway project team are also participating in the discussions.
Sukuk are financial instruments structured to comply with Islamic finance principles, which prohibit the payment or receipt of interest.
Instead, investors receive returns linked to underlying assets or revenue-generating projects.
Sovereign sukuk markets have expanded rapidly in recent years as African governments seek to diversify funding sources and tap into growing pools of Islamic finance capital, particularly from the Middle East and Asia.
Countries including South Africa, Nigeria and Senegal have previously issued sovereign sukuk to finance infrastructure and development projects.
Uganda’s planned issuance marks another step in the country’s efforts to modernise transport infrastructure and improve regional trade competitiveness.
The Standard Gauge Railway project is expected to connect Uganda more efficiently to regional ports and neighbouring economies, reducing transport costs and easing movement of goods.
Infrastructure development remains a key priority for the Ugandan government as it seeks to support industrialisation, boost exports and attract investment.
However, large-scale infrastructure projects have also raised concerns about debt sustainability across several African economies, especially amid rising borrowing costs and currency pressures.
Analysts say Uganda’s move toward Islamic financing could broaden its investor base while potentially lowering financing risks through more diversified funding channels.
The East African nation has been pursuing a range of infrastructure investments in transport, energy and oil development ahead of planned crude oil production expected to begin in coming years.
Economists say improved rail connectivity could strengthen trade within the East African region and reduce reliance on road transport, which remains costly and vulnerable to congestion.
The sukuk issuance also reflects growing interest in Islamic finance products across sub-Saharan Africa as governments explore alternative financing mechanisms for development projects.