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PAKISTAN: Al Baraka Bank
Pakistan, a member of the Bahrain-based Al Baraka Banking Group and one
of Pakistan’s five fully-fledged Islamic banks, has issued the country’s
first subordinated Sukuk, raising PKR2 billion (US$19.31 million) in the
privately-placed issuance.
The issuance is the first of its kind to be issued by an Islamic bank in
Pakistan, according to Abdullah Ghaffar, the bank’s head of investment
banking. The ‘A’-rated, seven-year paper utilizes a Mudarabah structure
and includes loss absorbency features. Ghaffar elaborates: “The Tier 2
Sukuk by its nature is unsecured and subordinated, is rated and privately
placed to institutional investors in local currency.” The minimum paid-up
capital for Islamic banks in Pakistan is PKR6 billion (US$57.95 million)
and in issuing, Al Baraka Bank Pakistan has followed in the footsteps of
a number of Shariah compliant banks worldwide, including AlBaraka Turk,
which last year issued US$200 million Sukuk to boost Tier 2 capital.
Al Baraka Bank Pakistan, the country’s second-largest Islamic bank by
assets, was established in 1991 and currently has a branch network of 110
branches across 58 cities, with plans to expand its reach to 83 towns and
cities within Pakistan. As the drive to increase the footprint of Islamic
finance in Pakistan continues, Al Baraka Bank Pakistan has contributed to
its development, acting as lead advisor and arranger on a PKR3 billion
(US$28.97 million) Musharakah-based transaction to Zaver Petroleum
Corporation in May. In August, the bank announced a research partnership
with the World Bank examining the risk-management challenges facing
Islamic banks, with a particular focus on Musharakah and Mudarabah under
the profit-and-loss-sharing system.
Plans for the subordinated Sukuk were announced in May by Adnan Ahmed
Yousif, CEO of Al Baraka Banking Group, following confirmation from the
government of Pakistan that it would be issuing sovereign Sukuk of US$1
billion. The government this week stated that the auction for the
sovereign issuance will take place before the end of October.
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