Islamabad: The Securities and Exchange Commission of Pakistan (SECP) has released two concept papers aimed at developing the short-term listed sukuk market, marking a significant step towards expanding shariah-compliant financial solutions within the country’s capital markets.
According to Securities and Exchange Commission of Pakistan announcement issued on 09 August 2024, these papers were published to spur public consultation and outline potential regulatory adjustments to facilitate the listing of both sovereign and corporate sukuk instruments. This initiative is part of broader efforts to provide versatile, shariah-compliant financing options that meet the diverse needs of issuers and investors alike. Currently, the Government of Pakistan has actively been utilizing the capital market for fundraising, amassing approximately PKR 713 billion through eleven sovereign Ijara sukuk auctions with various maturities since December 2023.
However, there are limitations under the current Ijara structure for issuing short-term tradeable sukuks with maturities of 3, 6, and 9 months, prompting the SECP to consider alternative shariah-compliant structures. Additionally, while short-term sukuks are gaining popularity among investors, corporate entities typically opt for private placements that are unlisted, restricting their fundraising capabilities to a narrower investor base.
The concept papers propose several measures to make the listing of such instruments more attractive, including offering streamlined regulatory processes, reduced costs, and more flexibility in the appointment of financial intermediaries. These suggestions align with SECP’s ongoing commitment to support the Federal Shariat Court’s directive for a RIBA-free economy and to boost the local and international appeal of Pakistan’s sukuk market.