Why Sukuk has a liquidity problem — and why tokenization solves it

The Proof of Demand Already Exists

On March 23, 2017, Kenya launched M-Akiba — a mobile-first government bond with a KSh 3,000 minimum (about $30). Within days, 102,632 Kenyans had registered. 5,692 bought. The KSh 150 million pilot sold out.

The June 2017 full launch targeted KSh 1 billion. Over 300,000 registered. Only KSh 247.75 million was raised — 25% of target. 84% of actual buyers said they liked the product and would recommend it. The demand was real. The execution collapsed.

Post-mortems found the same structural failure repeated at scale: 59% of registrants were university graduates, 51% were from Nairobi. The rural, mobile-first audience M-Akiba was designed for never converted. More than 60% of registrants received no follow-up guidance. The launch ran into national elections. The infrastructure reached people; the product delivery chain did not.

Now apply that same demand signal to Sukuk — Islamic fixed income — and the opportunity becomes sharper. Kenya has 5.2 million Muslims (11% of population, 2019 KPHC census). Tanzania has 18–23 million (30–37%, Afrobarometer 2022). Uganda approximately 5.4 million. Pew projects East Africa's Muslim population grew from 70.3 million in 2010 to 109.5 million by 2030. These are people who want Shariah-compliant savings instruments. They already have mobile money. What they do not have is access.

The Liquidity Problem Is Structural, Not Incidental

Sukuk are not illiquid because of investor disinterest. They are illiquid because the market infrastructure was built for a different era and a different participant set.

Global outstanding Sukuk stood at approximately $930 billion at end-2024, with $193.4 billion in new issuance that year. This is not a small market. Yet secondary market trading is thin, episodic, and structurally expensive for anyone below the institutional tier.

A 25–50 basis point bid-ask spread is not a rounding error. On a $1 million position, that is $2,500–$5,000 in friction every time you need liquidity. For institutional treasuries managing multiple positions, this cost compounds into a structural disincentive to trade. For retail, it is simply a closed door.

The Minimum Ticket Is a Feature, Not a Bug — For Issuers

The standard minimum for Sukuk investment is USD 200,000 — the Qualified Institutional Buyer threshold under SEC Rule 144A, and standard practice at institutions like Standard Chartered Malaysia. This is not arbitrary. It is a compliance shortcut: screen out retail investors by price, avoid the disclosure and suitability obligations that come with retail distribution.

A few jurisdictions have run retail experiments. The UAE Ministry of Finance offers Retail Sukuk at AED 4,000 (approximately $1,090). Bangladesh's 6th Government Sukuk set a minimum of Tk 10,000 (approximately $90). Bursa Malaysia's Exchange-Traded Bond and Sukuk platform runs at MYR 1,000 (~$220). These exist. They work. They are not the norm.

The most aggressive reduction came from an unexpected direction: on October 5, 2023, Fusang Exchange — operating under the Labuan Malaysia framework — tokenized a Sukuk with a USD 100 minimum, a one-month tenor, and a 5.37% annualized profit rate. That is a 2,000x reduction in the entry threshold against the institutional standard.

What Settlement Friction Actually Costs

For institutional players with deep liquidity buffers, T+2 is a manageable inconvenience. For a retail investor who needs to cover a medical bill or respond to a family emergency, T+2 settlement from an OTC desk they cannot access is functionally equivalent to no liquidity at all.

The Distribution Problem: Who Absorbs the Issuance

The Islamic Development Bank's Sukuk issuance pattern illustrates where the paper goes. In five issuances between 2022 and 2024 — totaling $7.85 billion — central banks absorbed 62–68% of each issuance. Asset managers took 3–4%.

Central bank absorption at that scale is not market demand. It is placement — sovereign-level balance sheet management with no secondary market intent. When 65% of a $2 billion issuance sits on central bank books, secondary market liquidity is structural zero before the first day of trading ends.

Africa's sovereign Sukuk market has accumulated approximately $6.6 billion across eight sovereigns since 2014. The Kenya Linzi Sukuk — KSh 3 billion ($23 million), Ijarah structure, 15-year tenor, 11.13% IRR — listed on the NSE Unquoted Securities Platform on July 31, 2024. It finances 3,069 Kenya Defence Forces housing units. The instrument exists. The domestic retail investor is not in the room.

The Mobile Money Layer Changes the Math

M-Pesa Kenya reported 34 million subscribers in late 2024 — 82% adult penetration. The platform processed KSh 40 trillion ($309 billion) across 28 billion transactions in FY2023/24. There are 381,000 agents. Across Africa, M-Pesa has 66.2 million customers and generated approximately $1.1 billion in revenue in 2024, up 19% year-on-year.

The infrastructure for mass financial participation in East Africa already exists and operates at scale. M-Akiba proved this in 2017 — the rails worked, the product reached people, the distribution chain failed. The question is not whether mobile money users can be reached. The question is whether the investment product on the other end of the rail is designed for them.

Tokenization Addresses All Four Structural Problems

What M-Akiba Got Wrong and How to Fix It

M-Akiba's failure was not demand failure. 84% of buyers liked the product. The failure was a distribution and onboarding gap between registration and conversion. 60%+ of registrants received no follow-up. The audience skewed urban and educated — not the mobile-first base the product was designed for.

• Onboarding completes at the point of registration — no separate follow-up step, no drop-off window
• KYC is mobile-first: national ID + selfie, not branch visit or document upload requiring desktop
• Profit distributions hit mobile wallets directly — no bank account required
• Secondary market is always open — the investor is not locked until a dealer picks up the phone
• Minimum ticket is within the range of a single M-Pesa transaction for most subscribers

Token-x provides full-stack ERC-3643 infrastructure for compliant Sukuk issuance — including KYC/KYB pipelines, on-chain Transfer Agent controls, smart contract-enforced Shariah compliance, T+0 ATS secondary market settlement, and mobile money distribution integration. Contact Datacraft Ltd to discuss pilot issuance design for East African Sukuk.