The Securities and Exchange Commission of Pakistan (SECP) has issued two concept papers to further the development of Pakistan’s short-term listed sukuk market.
These papers aim to initiate public consultation on key issues and suggest customized regulatory interventions to promote the listing of short-term sovereign and corporate sukuk instruments.
Pakistan’s capital market provides shariah-compliant borrowing solutions to the Government of Pakistan (GOP) and the corporate sector. Therefore, a vibrant, listed short-term sukuk segment would enable various Shariah-compliant financial solutions and better cater to the needs of issuers and investors. The GOP has been actively raising funds from the capital market through the issuance of sovereign Ijara sukuk instruments since December 2023.
At present, the GOP has raised approximately Rs. 713 billion through eleven auctions by issuing different types of sovereign Ijara sukuk instruments of varying maturities (1 yr, 3 yr, and 5yr) through PSX. However, short-term tradeable sovereign sukuks with 3, 6, or 9-month maturities cannot be issued under the Ijara structure. SECP intends to explore alternate shariah-compliant structures for issuance of tradeable, sovereign sukuks having 3, 6, and 9-month maturities.
Short-term sukuks are becoming increasingly popular amongst capital market investors. Corporates, however, prefer structuring such short-term instruments as privately placed and unlisted, even though this limits the ability to raise funds from a larger pool of investors. The concept paper on the listing of short-term corporate sukuks advocates avenues for making the listing of such sukuks more appealing in terms of efficiency, procedural convenience, and cost.
Possible solutions envisage facilitating issuers in issuing short-term listed sukuks by providing a condensed version of the Shelf Prospectus/Supplement to the Prospectus/Abridged Prospectus, electronic publication of Abridged Prospectus, streamlining regulatory approval timelines, reducing regulatory costs, and providing flexibility in appointment of intermediaries such as CTI and underwriters, etc.
Growth and development of the sukuk market also reinforce SECP’s commitment to the Federal Shariat Court’s ruling for creating a RIBA-free economy. Short-term sukuks hold immense potential and are rapidly becoming the preferred financing alternative, both locally and internationally.
The concept papers have been published on SECP’s website and can be accessed here and here.
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