The State Bank of Pakistan (SBP) has launched updated Islamic Financing Facility for Renewable Energy (IFRE) for Islamic Banking Institutions (IBIs) and DFIs having authorized Islamic financing operations. The financing under this facility will be available for power projects/installations using alternative/renewable energy sources including solar, wind, hydro, biogas, bio-fuels, baggasse cogeneration, and geothermal as fuel.
Earlier, the SBP introduced a Modaraba-based "Islamic Financing Facility for Renewable Energy" in February this year and now an updated IFRE is being issued. This updated IFRE will supersede and replace the facility issued earlier. In order to make available SBP's "Financing Facility for Renewable Energy" to all Islamic Banking Institutions (IBIs) and DFIs having authorized Islamic financing operations, a Modaraba based financing facility has been launched.
Modaraba investment would be provided to IBIs and DFIs having authorized Islamic financing operations, selected as Participating Islamic Financial Institutions (PIFIs) on their financing to the eligible projects/ sponsors. Under this Facility, the SBP acting as Rab-ul-Maal will make Modaraba investments in general pool of PIFIs. The exposure of SBP under the Scheme will be on all assets of the PIFI's general pool to the extent of SBP's investment, and therefore will not be limited to the assets financed under the facility.
The financing under IFRE will now available to the customers under three categories. Under the category-I, prospective sponsors desirous of setting up renewable energy power projects with a capacity ranging from more than 1 MW and up to 50 MW for their own use, selling electricity to the national grid (including distribution companies) or combination of both van be applied. Under Category-I of the Scheme will be available for a maximum period of twelve (12) years including a maximum grace period of two (2) years from the date of first disbursement. Category-II is for prospective sponsors desirous of installing renewable energy source based projects/solutions for generation of electricity up-to 1 MW. The financing under category-II facility will be available for a maximum period of 10 years including maximum grace period of three (3) months.
Category-III will be for vendors and suppliers certified under AEDB Certification Regulation 2018 for installation of wind and solar systems on lease basis or selling of electricity to ultimate owners/users. Under this category, the disbursements to the vendor/ supplier for a single client (ultimate owner/user) will constitute a separate financing with its own repayment/redemption schedule not exceeding ten (10) years from the date of first disbursement to vendor/supplier for that particular client. As per procedure SBP will make Modaraba investment in general pool of PIFIs under IFRE. Mudarabah investment of SBP in IFRE will be available upto maximum financing limit of eligible projects as prescribed under each category of the scheme. IFRE will be effective immediately and financing will be available for projects achieving financial close under Category I and new sanctions under Category II or III up to June 30, 2022 only.
The IBIs and DFIs having authorized Islamic financing operations under permission of SBP may submit their requests for the status of PIFI keeping in view the criteria given in the facility.
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