Page 94 - CMA Journal (Mar-Apr 2025)

O TH ER F EATURES

South Africa 4) Strengthen the Islamic Finance Ecosystem -
Regular sovereign sukuk issuances can help establish an
In 2021, South Africa issued sukuk worth Islamic yield curve, encouraging banks, corporations,
approximately USD 127 million through the and public-sector entities to issue their own sukuk. South
RSA Domestic Sukuk Trustee, marking progress in Islamic Africa’s sukuk strategy targeted state-owned enterprises
finance. Rated ‘BB-’ by Fitch, the sukuk reflects sovereign (SOEs), and Pakistan can follow by enabling SOEs in
obligations, backed by rental income and purchase energy, water, and transport sectors to access sukuk
undertakings. Proceeds went to the National Revenue Fund markets. Introducing standard benchmarks (3-, 5-, and
under South African law, signaling efforts to diversify 10-year sukuk) and promoting sukuk-based funds or
funding through Shariah-compliant instruments. ETFs can deepen market liquidity and resilience.

Nigeria 5) Promote Financial Inclusion and Sustainable
Finance - Opening sukuk auctions to retail
In 2024, Nigeria issued a N350 billion
investors—through Roshan Digital Accounts and local
sovereign sukuk for infrastructure and plans banks—will enhance financial inclusion. The May 2025
its first USD 500 million sukuk under external borrowing. By
auction welcomed both domestic and overseas retail
2023, its Islamic finance industry had grown to N2.5 trillion, participation. Continuing this inclusive approach allows
with N1.36 trillion in Islamic banking assets and N1.09 trillion
individuals to invest in national development.
in sukuk—highlighting sukuk’s growing role in funding and
Embedding ESG disclosures (e.g., impact reports) will
Shariah-compliant finance.
promote transparency and encourage responsible
investing, helping mainstream both Islamic and
How Pakistan Can Learn from Global
sustainable finance in Pakistan.
Sukuk Experience
Conclusion
1) Use Green Sukuk to Finance Climate Projects
Pakistan’s Green Sukuk initiative holds significant promise as
- Pakistan can use Green Sukuk proceeds to fund key a strategic financing tool—provided it is anchored in
climate-related initiatives such as solar and wind farms, transparency, regulatory reform, and investor trust. As noted
hydropower projects, and electric public by the PSX, this first Green Sukuk represents “a
transport—similar to how Nigeria used sukuk for road groundbreaking step in Pakistan’s journey toward
infrastructure. Preparing a clear list of eligible projects sustainable development.”
(e.g., renewable energy, irrigation, climate adaptation)
To fully realize this potential, Pakistan must continue to:
can build investor confidence. Linking each sukuk
tranche to specific assets (like solar parks or dam • Strengthen transparency through robust tracking of
construction) can also facilitate Shariah compliance and green expenditures,
improve ESG ratings. • Simplify tax and legal frameworks to attract wider
participation, and
2) Attract Overseas and Islamic Investors - To
broaden its investor base, Pakistan should actively • Engage global investors by building credibility through
ratings and reforms.
market its sukuk to global Islamic finance institutions
and the Pakistani diaspora. Like Nigeria’s diaspora bond If these foundations are maintained, Green Sukuk can go
and Hong Kong’s outreach to international funds, beyond project financing—they can become a catalyst for
Pakistan can consider issuing a USD or diaspora-focused broader economic reform and a gateway to sustainable,
sukuk to tap into Gulf sovereign wealth funds, Asian international capital. By aligning Shariah principles with
Islamic banks, and expatriate savers. Strong foreign climate goals, Pakistan has the opportunity to transform
participation would support external financing and ease Green Sukuk into a lasting driver of inclusive growth and
climate resilience.
pressure on currency reserves.
References
3) Reduce Dependence on Expensive
https://profit.pakistantoday.com.pk/2025/04/22/govt-to-raise-rs52bn-through
Borrowing - By expanding sukuk issuance, Pakistan -green-sukuk-bonds-for-three-clean-energy-projects
can shift away from costly conventional debt. The May https://newsnreleases.com/2025/04/18/green-sukuk-framework-investing
2025 Green Sukuk already accounted for 14% of https://www.brecorder.com/news/40361640/green-sukuk-makes-debut-with-r
s20-30bn-issue
domestic sukuk. Increasing this share would reduce
https://www.arabnews.com/node/2587267/business-economy
borrowing costs and foreign exchange risk. With sound https://propakistani.pk/2024/10/17/psx-raises-over-rs-1-trillion-through-issua
reforms and improved credit ratings, Pakistan could nce-of-gop-ijarah-sukuk
issue sukuk at lower spreads—similar to Hong Kong’s https://profit.pakistantoday.com.pk/2025/02/27/govt-raises-rs2-25-trillion-thr
ough-18-sukuk-auctions-since-december-2023
success. Green Sukuk thus offer dual benefits:
https://ahmedandqazi.com/first-private-sector-green-sukuk
supporting sustainable development while reducing https://www.dawn.com/news/1909335
debt servicing costs. https://www.brecorder.com/news/40355334

92 ICMA’s Chartered Management Accountant, Mar-Apr 2025