Karachi, Sept 08: Pakistan plans to launch its first bond offering that complies with Islamic banking practices, as the country's financial institutions try to tap the market for an alternative to western-style banking, officials said today. The new bond is likely to be floated within the next six months, said Irfan Siddiqui, president of Meezan Bank Ltd, an Islamic retail bank. He is advising the central bank on the launch of the bond.

Many Muslims are averse to putting their money into interest-bearing accounts, which they feel violate an Islamic ban on usury. A coalition of right-wing Islamic political parties has also called on the government to devise new banking methods that are in keeping with Shariah, or Islamic law.

The new bonds must be offered for a specific venture. They don't offer interest, but they do give investors a chance to make a profit if the venture succeeds.


The scheme, which offers similar returns to traditional interest-bearing bonds, has been deemed to be in keeping with Islamic practice. Siddiqui said a three-year government certificate for USD 86.5 million is expected to be modelled on one launched recently in Bahrain. Known as lease certificates, the bonds are the main form of money-market borrowing in the Gulf state, the banking capital of the Middle East. The bonds have to be backed by a fixed underlying asset, such as real estate.

Bureau Report