Concept papers issued for developing Pakistan’s short-term listed Sukuk Market

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has taken a significant step to bolster the country’s short-term listed Sukuk market by issuing two concept papers aimed at enhancing the regulatory framework for these instruments.

As per the press release issued by the SECP on Friday, these papers are designed to initiate public consultation on key issues and suggest targeted regulatory interventions to encourage the listing of both sovereign and corporate short-term Sukuk.

Pakistan’s capital market has been providing Shariah-compliant borrowing solutions to the Government of Pakistan (GOP) and the corporate sector, particularly through the issuance of sovereign Ijara Sukuk.

Since December 2023, the GOP has successfully raised approximately Rs713 billion through 11 auctions, issuing various types of sovereign Ijara Sukuk with maturities ranging from one to five years via the Pakistan Stock Exchange (PSX).

However, the current Ijara structure does not accommodate the issuance of short-term tradeable sovereign Sukuks with 3, 6, or 9-month maturities.

To address this gap, SECP is exploring alternative Shariah-compliant structures to facilitate the issuance of these shorter-term instruments, which are increasingly popular among capital market investors.

While corporates in Pakistan have shown a preference for privately placed, unlisted short-term Sukuks, this approach limits their access to a broader investor base.

The concept paper on corporate Sukuks aims to make the listing of these instruments more attractive by streamlining the process, reducing regulatory costs, and offering greater flexibility in the appointment of intermediaries like Centralized Trading Institutions (CTI) and underwriters.

Proposed measures include introducing a condensed version of the Shelf Prospectus or Abridged Prospectus, allowing for electronic publication, and shortening regulatory approval timelines. These changes are expected to enhance procedural efficiency, making it easier and more cost-effective for issuers to tap into a larger pool of investors through listed short-term Sukuks.