New framework enables corporates, mutual funds, pension funds and retail investors to access government-backed Shariah-compliant securities
KARACHI: The Government of Pakistan has taken a significant step towards broadening participation in the country’s Islamic debt market by allowing non-bank investors, including corporates, investment funds and individual investors, to participate in auctions for the purchase and sale of Government of Pakistan (GoP) Sukuk.
The move, announced through revised guidelines issued by the State Bank of Pakistan (SBP), is aimed at deepening the domestic Islamic capital market and expanding access to government-backed Shariah-compliant investment instruments beyond the banking sector.
Previously, Bai-Muajjal-based Sukuk auctions were largely dominated by Islamic banking institutions. Under the new framework, non-bank investors will be able to participate through pass-through or non-competitive bids submitted via Islamic Banking Institutions (IBIs) or Islamic Banking Branches (IBBs).
According to the revised guidelines issued under DMMD Circular No. 18 of 2015, Islamic banks and branches will act as intermediaries and submit the required documentation on behalf of eligible investors.
For non-competitive bids, participating Islamic banks will provide details including the investor’s name or account title and the amount of Sukuk intended for purchase or sale, without quoting a price. Investors will be required to submit an undertaking and authorisation form to their chosen Islamic bank before participating in the auction process.
The guidelines specify that only one non-competitive bid will be permitted for each tenor, a measure designed to ensure transparency and orderly participation. Non-competitive bids must be submitted one day before the scheduled competitive auction or in accordance with the auction calendar issued by the authorities.
A key feature of the new mechanism is that successful non-competitive bidders will receive allocations at the uniform price determined through the competitive auction process. This allows smaller investors to access the same pricing enjoyed by larger institutional participants.
Market participants believe the initiative will significantly widen the investor base for government Sukuk and attract fresh liquidity into Shariah-compliant financial instruments. The move is also expected to support the government’s efforts to diversify funding sources beyond traditional banking channels.
The inclusion of corporates, mutual funds, pension funds and retail investors is likely to improve liquidity and price discovery in the Islamic debt market while further strengthening Pakistan’s rapidly expanding Islamic finance sector.
Financial analysts view the decision as an important milestone in the development of a more inclusive and diversified domestic capital market. They say broader access to government-backed Sukuk will not only provide investors with secure Shariah-compliant investment opportunities but also contribute to the long-term growth and maturity of Pakistan’s Islamic financial system.
