ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued two concept papers to support the development of Pakistan’s short-term listed sukuk market.
The documents aim to launch a public consultation on key issues and propose tailored regulatory interventions to support the listing of short-term sovereign and corporate sukuk instruments, said a press release issued on Friday.
Pakistan Capital Market provides Sharia compliant lending solutions to the Government of Pakistan (GOP) and the corporate sector.
A live, listed short-term sukuk segment would therefore enable a variety of Shariah-compliant financing solutions and better meet the needs of issuers and investors.
The Republic Party has been actively raising funds from the capital market through the issuance of sovereign Ijara sukuk instruments since December 2023. Currently, through eleven auctions, the Republic Party has raised approximately Rs 713 billion by issuing various types of sovereign Ijara sukuk instruments with different maturities ( 1 year, 3 years and 5 years) via PSX.
However, short-term marketable government sukuk with maturities of 3, 6 or 9 months cannot be issued under the Ijara structure. The SECP intends to explore alternative Shariah-compliant structures for issuing tradable, sovereign sukuk with maturities of 3, 6 and 9 months.
Short-term sukuk are increasingly popular among capital market investors. However, businesses prefer structuring such short-term instruments as privately placed and unlisted, even though this limits the ability to raise funds from a larger group of investors.
The concept paper on the listing of short-term corporate sukuk advocates ways to make the listing of such sukuk more attractive in terms of efficiency, procedural convenience and cost.
Possible solutions include making it easier for issuers to issue short-term listed sukuk by providing an abbreviated version of the prospectus/prospectus supplement/abbreviated prospectus, electronic publication of the abbreviated prospectus, streamlining regulatory approval deadlines, reducing regulatory costs and providing flexibility in appointing intermediaries such as CTIs and underwriters, etc.
The growth and development of the sukuk market also reinforces the SECP’s commitment to the Federal Shariat Court’s decision to create a RIBA-free economy. Short-term sukuk have huge potential and are fast becoming the preferred financing alternative, both locally and internationally.
