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Pakistan plans to issue first local currency Islamic bond next month

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Points of Essence:

  • Pakistan will issue rupee-dominated Islamic bond for its domestic market consumption in September.
  • The issuance will be handled by Standard Chartered Bank and Dubai Islamic Bank which would be less than Rs 20 billion than what the market had expected.
  • The Islamic bond will further stimulate the growth of the Islamic finance industry which shared 3.2% of the total banking system in Pakistan and only accounted for Rs 135 billion of assets.

Published: August 15, 2008, 23:58

Kuala Lumpur: Pakistan will issue its first local currency Sharia-compliant bond in September, a government official said yesterday, as the Muslim nation seeks to build its fledging Islamic finance industry.

Ashfaque Hassan Khan, special secretary at the Finance Ministry, said the issue size had not been determined although it would be “substantially less” than the Rs20 billion ($269.5 million) some bankers had earlier expected.

“We have already completed all the paperwork and we hope to be in the market sometime in Sep-tember,” Khan told Reuters by telephone. “This is the first time we will be going to the market with a rupee-denominated local sukuk.”

Standard Chartered Bank and Dubai Islamic Bank are handling the deal, he added.


The Pakistani authorities are trying to expand the Islamic banking industry, which only commands a small market share and is largely concentrated in large cities.

The share of Islamic banking in the total banking system was 3.2 per cent last year, according to central bank data.

The total assets of Islamic banks were about Rs135 billion while Islamic deposits and financings stood at 2.9 per cent and 2.4 per cent of market share, respectively.

Islamic banks must grow at least 40-50 per cent each year to be able to raise their share from 3.5 per cent to about 15 per cent of the total banking system, the central bank has estimated.

Khan said the government had no immediate plans to sell global Islamic bonds.

“The spread has widened substantially because of both external and internal political developments,” Khan said.


Written by Suapi Shaffaii

August 16, 2008 at 2:24 am

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