As part of its mandate to develop the Islamic capital market and to facilitate fund-raising through Sharia compliant financial products, the Securities and Exchange Commission of Pakistan (SECP) has approved the regulations for issuance of Sukuk.
The Sukuk Regulations, 2015 (the Regulations) has been made under Section 506A of the Companies Ordinance, 1984 (the Ordinance). The draft of the Regulations was earlier notified for soliciting public comments thereon.
Islamic capital market is considered as an important segment of a developed and broad-based capital market. A developed Islamic capital market can play a vital role in the economic growth of a country.
Currently Sukuk are issued as an instrument of redeemable capital under Section 120 of the Ordinance mainly through private placements. Beside Section 120, no other specific regulatory framework existed for structuring and issuance of Sukuk. Therefore, it had become imperative to have a separate set of regulatory framework for issuance of Sukuk. Major investors in Sukuk include the mutual funds, employees’ funds, commercial banks both conventional and Islamic and NBFCs which directly or indirectly hold public funds.
The Regulations prescribe certain conditions to be met before issuance of Sukuk and the eligibility criteria for the issuers. The Regulations in addition to the disclosure and reporting requirements also require appointment of the sharia advisor and investment agent. The sharia advisor will help in structuring of Sukuk ensuring that these are structured according to the sharia principles.
From the market sources, it has been observed that substantial amount of fund is held by investors who are looking for investment in shariah compliant financial products. The Regulations will enhance investors’ confidence which will help develop the Sukuk market.
