Dr Ashfaq Hasan Khan, Economic Adviser in Finance Ministry, will hold a meeting on Monday to set the modalities for the launch of Shariah compatible ''Islamic bonds'' called ''Sukuk''. The government is planning to launch these bonds for domestic Islamic banks to facilitate their daily cash transactions. Sources told Business Recorder that the bond would create a T-Bills market for local Islamic banks which have no buying and selling instruments for their daily or weekly cash requirements.
The bonds issue is likely to range from Rs 10 billion to Rs 15 billion which in the next three to four months would take a concrete shape after the issuance of dollar Islamic Bonds to be launched in the international market around the start of next calendar year.
The local ''Sukuk'', like the international Islamic bonds, would be backed by some domestic institutions or buildings which can be given on rent or are earning some profit. The rent or profit of the bonds would help determine its rate of return. However, at the launch of the bonds some fixed rate would be determined keeping in view of prevailing rates of T-Bills. As the ''Sukuk'' would enter the secondary market its rates would become floating.
The three-year maturity bond issue would deepen the overall bonds market in Pakistan and would largely facilitate the banks in raising their capital requirements up to Rs 2 billion, which they have to match with other conventional banks.
Islamic banks cannot take usual State Bank T-Bills or Pakistan Investment Bonds because of their interest-based nature, which is not permissible according to Islamic injunctions.
Islamic banks are growing at a substantial pace as the acceptance of the Islamic instruments is multiplying among the masses. Savers do come to get their ''halal'' profits from Islamic bank branches in Islamabad or Rawalpindi from other cities, because the network of such bank branches is limited to big cities. There are around 25 branches of Islamic banks allowed by State bank. Some conventional banks are also opening their branches with Islamic instruments. These banks have to follow strict prudential regulations laid by State bank.
In business groups, some major and several medium size business organisations are gradually joining the corps who are using only Islamic financing instruments for their running business requirements.
Initially, Sitara Chemicals had started it a few years ago. The recent names are Haleeb Dairy, earlier known as Chaudry Dairy; Khas Traders in leather, Ghani Group of Textiles, Mektar Pharmaceuticals.
There are several unknown medium size groups in steel and other businesses. There is a chain of successful experience being adopted by one company from another.
This has actually become a corporate ''Dawa'' (preach). One successful experience would help pitch their model to other companies.
The companies use equity financing for their business, which is permissible as per Islamic injunctions.