SBP issues Islamic financing scheme for renewable energy projects

KARACHI: State Bank of Pakistan (SBP) on Wednesday issued a new scheme of Islamic financing for renewable energy power projects.

The central bank said that it had issued IH&SMEFD Circular No. 01 dated February 22, 2019 introducing Mudarabah based ‘Islamic Financing Facility for Renewable Energy (IFRE)’ for Islamic Banking Institutions (IBIs) and DFIs having authorized Islamic financing operations.

Now an updated Islamic Financing Facility for Renewable Energy (IFRE) is being issued. This updated IFRE shall supersede and replace the Facility issued vide above-mentioned Circular.

The financing under IFRE is now available to the customers under three categories, as given below:

Category I: Prospective sponsors desirous of setting up renewable energy power projects with a capacity ranging from more than 1 MW and up-to 50 MW for their own use, selling electricity to the national grid (including distribution companies) or combination of both.

Category II: Prospective sponsors desirous of installing renewable energy source based projects/ solutions for generation of electricity up-to 1 MW.

Category III: Vendors and suppliers certified under AEDB Certification Regulation 2018 for installation of wind and solar systems on lease basis or selling of electricity to ultimate owners/users.

The SBP shall make Mudarabah investment in general pool of Participating Islamic Financial Institutions (PIFIs) under IFRE. Mudarabah investment of SBP in IFRE shall be available upto maximum financing limit of eligible projects as prescribed under each category of the Scheme.

IFRE shall be effective immediately and financing shall be available for projects achieving financial close under Category I and new sanctions under Category II or III after date of issuance of this Circular and up-to June 30, 2022 only.

The IBIs and DFIs having authorized Islamic financing operations under permission of SBP may submit their requests for the status of Participating Islamic Financial Institution (PIFI) keeping in view the criteria given in the facility.

They may also apply for allocation / assignment of limit for the current financial year. These requests may be submitted latest by 15th May each year. For the financial year 2019-20, these requests may be submitted within 30 days from the date of issuance of this Circular.

The IBIs and DFIs having authorized Islamic financing operations under permission of SBP which have already submitted their requests for status of PIFI and allocation of limit under earlier version, issued vide IH&SMEFD Circular No. 01 dated February 22, 2019, need not resubmit their requests unless they desire to revise amount of their requested limits.

However, they will be required to submit their updated operations/process manual aligned with this Scheme.

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