KARACHI, Dec 23: Banks found Term Finance Certificates (TFCs) a good option to raise funds despite the debt market remained in bad shape during 2008.

“In 2008, the total listed debt market grew by Rs24.8 billion where seven TFCs were offered at local bourses,” said Mohammad Imran, head of research at First Capital Equities, in his report issued on Tuesday.

In 2007, the number of TFCs issued was same. However, the amount offered was Rs10.2 billion in 2007, which was 57 per cent lower than what has been offered in 2008. Banks’ participation in TFC market remained strong during the year 2008. Out of seven TFCs issued, 2 were of the banks. During last few years, banking sector’s TFCs are part of the listed corporate debt market.

“These TFCs are counted in the calculation of Tier-2 capital of the banks. The size of banking sector TFCs was Rs9 billion in 2008. The banking sector TFCs will continue to become the part of the corporate debt market in years to come,” said Imran.

However, the health of stocks business the world-over might not allow banks to raise funds for their future consumption.

The reason is the increased requirement of the capital adequacy ratio (CAR). He expects the banking sector’s TFCs to occupy the major chunk of the corporate debt market in 2009 and 2010.

With an addition of Rs24.8 billion, the total outstanding TFC market is estimated to reach Rs65 billion to-date. It represents only 2.9 per cent of the KSE market capitalisation.

Historically, in last few years this ratio ranged between 1.2-1.6 per cent. But due to the bearish trend of KSE this ratio has improved to 2.9 per cent. On the other hand, these TFCs represent 2.1 per cent of total bank’s advances as on Dec 13, 2008.

“Credit penetration in Pakistan is 29 per cent of the GDP whereas listed TFCs penetration is only 0.6 per cent of GDP,” said the report.