KARACHI: In a groundbreaking development, the Pakistani government on Friday unlocked the Islamic bond market for retail investors through an auction of the country’s first-ever sovereign Ijarah Sukuk at the Pakistan Stock Exchange (PSX), aiming to raise Rs30 billion ($105.8 million).
Sukuk is an Islamic financial certificate that represents ownership in a tangible asset or a pool of assets. It is similar to a bond but is structured in a way that complies with Islamic law, which prohibits interest-based transactions.
In connection with the launch of the first Ijarah Sukuk a ‘gong ceremony’ was held at the PSX in Karachi, which was attended by Caretaker Prime Minister Anwaar-ul-Haq Kakar and Finance Minister Dr. Shamshad Akhtar.
Speaking at the ceremony, PM Kakar said the promotion of the auction was a collective responsibility of the Exchange Pakistan Stockbrokers Association, Security and Exchange Commission of Pakistan and all other market participants.
“Your participation will contribute to making this event a remarkable achievement for the entire market ecosystem,” he said. “Today, as we ring the gong, we herald not just market transactions, but a symphony of progress and prosperity.”
PM Kakar said this gong sound echoed across financial corridor of the nation and signaled commitment for fostering robust ecosystem.
“It signals our commitment to fostering an inclusive and robust financial ecosystem, one that welcomes diverse voices and ensures that the benefits of economic prosperity are shared by all,” he said.
About the current state of the Pakistan stock market, which continues to scale new highs, the prime minister said the investors regained their confidence after his government's successful signing of a $3 billion standby agreement with the International Monetary Fund (IMF), execution of the Financial Year 2024 budget, and improvements in fiscal and external accounts.
“This bullish sentiment was possible due to the improved economy and especially the participation of foreign investors due to low price earnings ratio, high dividend yield and stabilized exchange rate, pushing the KSE hundred to surge to 40% since early September, reaching an unprecedented level,” he said.
The tenure of Ijarah Sukuk, issued by Pakistan Domestic Sukuk Company Limited through the finance ministry, is one year that will mature on December 09, 2024. The face value of a Sukuk is Rs5,000 ($17.6), according to a PSX document.
Joint financial and Shariah advisers for the issuance of the bond include Meezan Bank Limited, Dubai Islamic Bank (Pakistan) Limited, Bank Islami Pakistan Limited and Bank Alfalah Limited.
The federal government plans to raise an overall Rs90 billion ($315 million) with three Ijarah Sukuk auctions. The second auction is scheduled for January 23, 2024 and the third for February 20, 2024, according to the PSX auction calendar.
Pakistani financial experts said the launch of government debt securities at the stock market would enhance the investor base and allow common investors to benefit from the issuance.
“The auction gives PSX investors the chance to invest, contributing to a more diverse investor base,” said Shahid Ali Habib, chief executive officer (CEO) of the Karachi-based Arif Habib Limited brokerage house.
“The move also promises a substantial boost to the Islamic capital market in Pakistan.”
Habib said the issuance will help in developing Islamic capital market in the country and will encourage more investors to look for interest free avenues.
Experts also believe the auction has ended the monopoly of big banks who would earlier take part in the auctions.
“The Sukuk would now be in the access of common investor as compared to the past practice where only big banks or mutual fund would invest,” Ali Nawaz, CEO of Chase Securities, told Arab News.
Nawaz said investors now would be able to avail entire profit of their investment, without the involvement of any intermediaries.
