Pakistan’s capital market regulator has published long-awaited rules for the issuance of sukuk, or Islamic bonds, as part of efforts to strengthen governance and broaden their appeal to investors.
The regulator first drafted the rules in October 2012, but efforts have accelerated under a five-year plan that authorities hope will double the industry’s share of the banking sector to 20 percent by 2020.
The rules come at a time when issuance of corporate sukuk in Pakistan is gathering pace, helping broaden an Islamic capital market which in recent years has relied on the government for the bulk of such deals.
The current pipeline of sukuk includes utility K-Electric , which is planning a sukuk worth $217 million, which would be Pakistan’s largest corporate sukuk to date.
Pakistan Mobile Communications (Mobilink) and Bank Islami Pakistan also plan sukuk of their own.
Under the rules, sukuk will have to be structured to comply with standards of the Bahrain-based Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI), as well as those set by the local regulator.
AAOIFI standards indicate how Islamic financial products should be structured; complying with the standards could increase the appeal of sukuk to investors by addressing consumer concerns about their religious authenticity.
The rules require issuers to conduct an annual audit to ensure the sukuk confirms to sharia requirements. Sukuk must also carry a credit rating not lower than triple BBB.