Page 27 - CMA Journal (Mar-Apr 2025)

Exclusive Interview

Corporates are also using the sukuk market to fund their PSX has four Islamic indices, namely KMI-All Shares,
infrastructure development needs. For example, Jazz KMI-30, MZNPI (Meezan Pakistan Index) and MII30
Pakistan issued an innovative airtime-based Sukuk of (Mahaana Islamic Index), that comprise a total of 251, 30,
PKR 15 billion last year, becoming the first and largest 12 and 30 underlying Shariah-compliant securities,
short-term unsecured Sukuk by a telecom operator in respectively, as of December 31, 2024. During Jul-Dec
Pakistan. This was to fund the expansion of 4G networks 2024, a total trading turnover of 47.92 billion shares,
wherein the underlying assets were airtime, quantified 13.51 billion shares, 5.86 billion shares and 14.28 billion
through bundled voice calls, SMS, and data services, shares in the aforementioned indices, respectively, were
which were purchased by Sukuk investors at a recorded; that translates into 55.24%, 15.58%, 6.75% and
discounted price and sold through the telecom operator 16.46%, respectively, of total trading volume at the PSX.
to franchises over a six-month period. Similarly, trading values of PKR 2,505.88 billion, PKR
1,479.72 billion, PKR 955.12 billion and PKR 1,345.12
Last year, the SECP released two concept papers on billion were recorded during the same period, which
sovereign and corporate sukuk aimed at enhancing the translates into 71.71%, 42.35%, 27.33% and 39.3% of
short-term sukuk market. The proposed measures to total trading value at PSX. From these statistics, one can
simplify the issuance process for short-term listed sukuks see that the majority of trading at PSX is conducted in
included introducing new structures for introducing Shariah-compliant securities.
short-term tradable sovereign sukuk and introducing a
condensed version of the Shelf Prospectus or Abridged In 2023-24, the SECP developed a comprehensive
Prospectus to facilitate repeat issuers of sukuk by regulatory framework for the Shariah screening process
accelerating regulatory approval timelines. Now our that includes introducing regulations for the conduct of
focus is making the regulatory process robust so the Shariah screening of securities and the construction of
simple listing process is simplified and cost and time for Islamic indices, notification of acceptable tolerance
levels for Shariah screening, and revision of disclosure
issuances for sukuk are reduced. We are focusing on requirements for listed companies under the Companies
developing secondary markets for Sukuk to enhance Act, 2017, to make the Shariah screening process clearer
liquidity and attract more participants.
and more transparent.
Coming back to your specific question, I agree that Sukuk In the Pakistani capital market, we have a mature Islamic
are increasingly being recognised as a powerful tool for collective schemes industry that includes mutual funds,
sustainable development, particularly in infrastructure pension funds, real estate investment trusts (REITs),
development, in both the private and public sectors. exchange-traded funds (ETFs) and private funds. The
Sukuk are contributing to sustainable development due size of Islamic mutual funds is PKR 1,914.55 billion as of
to their alignment with ethical and sustainable principles December 31, 2024, which represents a share of 43.13%
enshrined in Shariah structures. Green and Social Sukuk of overall mutual fund assets. The size of voluntary
are also being used to finance environmentally friendly pension fund schemes is PKR 62.40 billion as of
projects, renewable energy initiatives, and social December 31, 2024, which constitutes 65.32% of the
infrastructure. There are many examples in national and total pension fund industry of Pakistan. The size of
international markets of using sukuk to fund Shariah-compliant REITs is PKR 169.17 billion as of
infrastructure development and social projects, and the December 31, 2024, which is around 96% of the total
Pakistani sukuk market is now ready to serve these needs industry. Finally, we have modarabas in our capital
in a suitable manner. market that are unique collective investment vehicles
and the pioneer Islamic financial institutions in Pakistan.
ICMA: What role do Shariah-compliant financial The Modaraba sector, in particular, has the ability to play
instruments play in Pakistan’s capital markets?
an important role in serving SME financial needs and
Tariq Naseem: As I explained earlier, there is a variety of collaborating with other ventures as partners. As of
instruments in the Islamic capital market that play a December 31, 2024, we have twenty (20) Modarabas
pivotal role in the financial development and economic which are currently operational and listed on PSX, with
growth of the country. Apart from sukuk, total assets of the Modaraba sector amounting to PKR
Shariah-compliant securities of listed companies are 56.78 billion.
another type of financial instrument being used by the ICMA: What are the goals of the Islamic Capital
companies to raise funds and investors to make Market Development Committee (ICMDC), and how
investments. In the Pakistan Stock Exchange (PSX), there will it shape the future of Islamic finance in Pakistan?
are 271 (51.13%) Shariah-compliant securities out of a
total of 530 listed securities at PSX, with a market Tariq Naseem: You know after the FSC judgement, the
capitalisation of PKR 8,059 billion (55.60%) out of a total Federal Government has constituted a high-level
market capitalisation of PKR 14,494 billion as of steering committee under the patronage of the Minister
December 31, 2024. for Finance and Revenue.
ICMA’s Chartered Management Accountant, Mar-Apr 2025 25