KARACHI, Sept 12: The Japan Bank for International Corporation (JBIC) will launch shariah-compliant Sukuk bonds in Pakistan to tap the potential for the growth of Islamic banking, said banking sources.
“The JBIC is looking for Islamic funds and they are planning to enter Pakistan in February next year,” Dr Imran Usmani who is one of the counsels of the Shariah Board of the JBIC told Dawn on Tuesday.
Saudi Arabia could be their first destination for launch of these bonds, he said and added Malaysia was also on their target and Pakistan could be third destination.
The JBIC appointed Dr Muhammad Imran Usmani as its shariah counsel to provide advisory services for Islamic financial transactions and to provide the educational assistance to the basic Islamic financing techniques.
For this purpose a MoU was signed between the two in Tokyo on May 25, 2006. The JBIC also appointed two other renowned shariah scholars as members of its Shariah Counsel Group.
They are Dr Muhammad Ali Elgary, Professor King Abdul Aziz University, Saudi Arabia, and Professor Dr Muhammad Daud Bark, Dean of International Islamic University Malaysia.
Financial experts believe that about $500 billion liquid money is available in the Middle East after the price hike of the petroleum products. This petrodollar is looking for investment opportunities.
Analysts say the hostile American and Western attitude towards Muslim countries has created fears among the Arab investors and flow of money towards the American market has slowed down. This phenomenon kept this money unused. However, the Western financial institutions have devised Islamic instruments to attract this money.
“The Western banks are earning big money through the shariah-compliant products and these products are devised by the Muslim scholars,” said Dr Imran.
Regarding a question about the success of Japanese Sukuk bonds, Dr Imran said the bond would attract more than expected investment.
However, he did not know how much amount of Sukuk would be launched by the JBIC in Pakistan.
He said the planning was at initial stage and the JBIC did not decide even about the amount of Sukuk they were planning to launch in Saudi Arabia and Malaysia.
“Despite being non-Muslim country, Japan would not face difficulties to enter into the Muslim world with Islamic financial instruments,” said Dr Imran, adding that the Muslim scholars are playing key role in developing shariah-compliant financial products.
In the past three years, according to a published report, about $40 billion of Islamic Sukuk bonds were issued by the Middle Eastern and Asian companies as well as Muslim countries and some non-Islamic institutions such as the World Bank. Most recently, the first Islamic Bond was also issued by an American oil company, according to published.
Pakistan also issued $600 million Sukuk bonds which attracted an investment of about $1.2 billion.
“The attraction of $1.2 billion for Pakistani Sukuk reflects the potential for Islamic banking products and the Muslim countries should go fast to tap the potential,” said Dr Imran.
