Pakistan plans to expand its Shariah-compliant banking industry and attract more investors from the Gulf by boosting sales of Sukuk bills.
“Currently, we have three-year tenure securities in the market, however, the government would now like to introduce Sukuk maturing in a year or less,” spokesman for the State Bank, Syed Wasimuddin, said in a telephonic interview with The Express Tribune.
He said Islamic banks and Shariah-compliant mutual funds are dry in terms of investment opportunities.
“Securities of less than one-year maturity and Islamic inter-bank lending will attract local and foreign investors. We will participate in the auction,” he said. The move is expected to be made in the quarter ending September this year.
However, Wasimuddin declined to provide any further information, stating that the government will issue the statement announcing any further details and figures at a later date.
Sukuk is an Islamic financial certificate, similar to a bond in western finance that complies with Islamic laws. Because the traditional western interest paying bond structure is not permissible in Islam, the issuer of a Sukuk sells an investor group the certificate, who then rents it back to the issuer for a predetermined rental fee. The issuer also makes a contractual promise to buy back the bonds at a future date at par value.
Global sales of Islamic bonds fell 24 per cent to $6.5 billion so far this year, from the same period in 2009, according to statistics. Pakistan raised $600 million from its first sale of Sukuk in the overseas market in January 2005.
Published in The Express Tribune, July 6th, 2010.
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