Shariah-compliant euro, pound bonds expected this week

KARACHI: The government is all set to issue pound sterling and euro denominated shariah-compliant Naya Pakistan certificates for non-resident Pakistanis this week, sources said on Tuesday.

“Banks are getting prepared for offering the INPCs [Islamic Naya Pakistan Certificates] in British Pound and Euro after the government notified shariah structure for issuance of the Islamic NPCs in both currencies last week,” a source at a leading Islamic bank said.

The Islamic NPC Company Limited (INPCCL) has established GBP and EUR Mudarabah pools and it has invited banks to invest in it, sources said.

“The government has decided to launch the shariah compliant version called Islamic Naya Pakistan certificate in pound sterling and euro based on very strong demand from non-resident Pakistanis who want an interest free investment option and keeping in view the tremendous success of PKR and USD denominated Shariah compliant certificates,” the source said.

“The government looks to target expatriates living in the UK and the Europe through these bonds. The issuance of the Islamic certificates in euro and pound sterling would attract more faith-sensitive overseas Pakistanis to open Roshan digital account, invest their savings in Pakistan and support the country’s balance of payments and build-up forex reserves,” the source added.

The government introduced conventional NPCs denominated in Euro and British Pound and the central bank issued rules to invest in these NPCs last week.

The INPCCL, in consultation with the State Bank of Pakistan, has fixed the initial size of each pool at GBP 15 million and EUR 15 million. Each agent bank is invited to contribute GBP 1.5 million and EUR 1.5 million by remitting the same to the NOSTRO accounts of the SBP, INPCCL said in a circular to banks’ CEOs.

Sources said this amount will be used to provide shariah-compliant financing to the government under Ijarah mode.

The INPCCL said the agent banks’ investment in each pool would be transitory in nature and would be liquidated on a proportionate basis on the receipt of investment requests from eligible investors as defined in NPC rules.

“The agent banks’ investment in the Mudarabah pools shall be remunerated based on the profit sharing ratios and weightages to be identified each month. The expected profit of agent banks in the GBP and EUR pools for the month of February 2021 shall be 2.50 percent and 1.75 percent per annum respectively,” it said.

The Islamic certificates are expected to offer returns on three-month, six month, 12-month, three-year and five-year sterling denominated shariah-compliant paper yielding 5.25 percent, 5.50 percent, 5.75 percent, 6.25 percent, and 6.50 percent. The rate of profit on the three-month euro denominated Islamic certificates is likely to be 4.75 percent. For the six-month paper it would be 5 percent. For 12-month, three-year, and five-year certificates, it would be 5.25 percent, 5.50 percent and 5.75 percent.

NBPCs are attracting significant interest from both conventional and Islamic NPCs. Overseas Pakistanis have invested more than $300 million in NPCs in five months.