Regulations will help raise funds through Islamic financial products. PHOTO: SECP LOGO
A draft of Sukuk Regulations 2015 was earlier notified for seeking public comments.
According to the SECP, the Islamic capital market is considered an important segment of a developed and broad-based capital market. A developed Islamic capital market can play a vital role in economic growth of the country.
At present, sukuk is issued as an instrument of redeemable capital under Section 120 of the Companies Ordinance 1984 mainly through private placements.
Besides Section 120, no other specific regulatory framework existed for the structuring and issuance of sukuk. Therefore, it had become imperative to have a separate set of regulatory framework for the sukuk.
Major investors in sukuk include mutual funds, employee funds, commercial banks, both conventional and Islamic, and non-banking finance companies (NBFCs), which directly or indirectly hold public funds.
The regulations prescribe certain conditions to be met before the issuance of sukuk and the eligibility criteria for the issuers. In addition to the disclosure and reporting requirements, they also require appointment of a Shariah adviser and an investment agent.
The adviser will help in structuring of the sukuk, ensuring that it is structured according to the Shariah principles.
Market sources suggest that a substantial amount of funds is held by investors who are looking for investment in Shariah-compliant financial products. The SECP believes that the regulations will enhance investor confidence, which will help in the development of the sukuk market.
Published in The Express Tribune, February 6th, 2015.
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