KARACHI: For the first time in the country’s financial history, the private sector on Thursday issued Sharia-compliant domestic bonds worth 3.1 billion with the aim to promote the housing sector.

The Pakistan Mortgage Refinance Company (PMRC) issued Rs3.1bn sukuk bonds for a period of three years at the rate of 8.25 per cent.

The sukuk was jointly led by Pak Kuwait Investment Company (PKIC) and the Bank of Punjab (BoP). Investors include HBL (Islamic Banking), Askari Commercial Bank (Islamic Banking), Bank Islami, PKIC, BoP and Karandaaz Pakistan. Meezan Bank Limited structured the sukuk with the PMRC team.

The sukuk is the first of its kind and is based on Shirkah-tul-Aqd, the PMRC said.

Sharia-compliant domestic bond launched by PMRC to boost housing sector

Following Malaysia’s example, the PMRC was established to promote the housing sector in Pakistan. It receives low-cost money from the World Bank and extend loans to banks at cheaper rate only for the housing sector.

“The sukuk bonds offer 8.25pc return lower than the three-year Pakistan Investment Bonds,” said PMRC Group Head Zulfiqar Alam. He said the average lending rate of PMRC is 7.9pc. “The entire amount of Rs3.1bn would be given to banks with slightly higher rate compared to the sukuk rate of 8.25pc,” he added.

The PMRC will utilise the proceeds of this sukuk for further development of Sharia-compliant housing, residential mortgage financing as well as Housing Finance Portfolio (HFP) of eligible Islamic financial institutions.

PMRC Managing Director and CEO Mudassir H. Khan said that this sukuk was an innovation in Islamic financing and for the capital markets.

“I feel proud that PMRC is becoming an important player in development of affordable housing finance particularly low-income housing,” he said.

MEBL President and CEO Irfan Siddiqi said that Meezan Bank was pleased to partner with the PMRC in structuring this new and progressive sukuk for raising Islamic funds. “I am confident that this will greatly contribute towards increasing accessibility and growth in housing finance.”

The sukuk is based on a one of its kind Sharia-compliant structure under which the investors and PMRC will enter into a Musharakah Agreement to create Musharakah in the Housing Finance Portfolio. Profits of Musharakah business shall be shared between the sukuk holder and PMRC as per their ratio of investment.

Published in Dawn, March 19th, 2021