The government has raised a total of Rs371 billion (over $1.29bn) through the government’s Ijarah Sukuk as it was the highest issuance of Sukuk in a single auction since the start of the government’s Ijarah Sukuk programme in 2008, according to a press release issued by the Meezan Bank’s media cell the other day.
On Aug 3, various banks participated in the auction for investment in the Ijarah Sukuk where six denominations were open for bidding in the Sukuk which included 1,3 and 5 year fixed rate Sukuk and 1,3 and 5 year variable rate Sukuk.
The government intended to scale up a total of Rs240bn from the auctions, however the Sukuk were oversubscribed by over 200 per cent with total bids received equivalent to over Rs508bn (approximately $1.77bn).
On the basis of the announced cut-off rates, Sukuk equivalent to Rs371bn were issued under five denominations as per the following details while all bids were rejected against the 5 year fixed rate denomination.
1 Year VRR: Rs100,346m
1 Year FRR: Rs2,161m
3 Year VRR: RS5,000m
3 Year FRR: Rs68,385m
5 Year VRR: Rs195,250m
Total Accepted Amount: Rs371,142m
The rental rate against the above Sukuk varied from 18.49 per cent per annum to 23.62 per cent per annum depending on the tenure of the Sukuk. The rental payment is to be made on half yearly basis with Sukuk redemption at maturity.
The underlying asset utilized for Sukuk issuance was Islamabad Expressway on which an Ijarah sale and lease back transaction was performed. The underlying Shariah structure of the Sukuk was approved by Shariah Advisory Committee of State Bank of Pakistan, while the transaction was led by Meezan Bank limited alongside Dubai Islamic Bank Pakistan limited and Bank Alfalah limited as joint financial advisor to the transaction.
According to the Meezan Bank’s website, Pakistan’s best bank and the first and largest Islamic bank, is a publicly listed company with a paid-up capital of Rs17.91 billion. It is one of the fastest growing financial institutions in the banking sector of the country. With its Vision of establishing ‘Islamic banking as banking of first choice …’ – the First Islamic Bank commenced operations in 2002, after being issued the first-ever Islamic commercial banking licence by the State Bank of Pakistan (SBP).
The bank provides a comprehensive range of Islamic banking products and services through a retail banking network of more than 900 branches in more than 250 cities of the country. Backed by a state-of-the art T-24 core banking system, the branch network is supported by 24/7 banking services that include over 950 ATMs, VISA and MasterCard debit cards, a call center, internet banking, mobile application and SMS banking facility.
The bank operates strictly under the principles of Islamic Shariah and is well-recognised for its product development capability, Islamic banking research and advisory services. In order to ensure strict Shariah-compliance in all its products and services, the bank has established a dedicated product development and Shariah compliance department that operates under the supervision of the bank’s in-house resident Shariah board member and a Shariah board comprising of internationally renowned Shariah scholars. Meezan Bank has been recognized as the ‘best bank in the country’ by Pakistan banking awards– the most prestigious awards in Pakistan’s banking sector, which is a testimony of the bank’s commitment to excellence.
