News Analysis |
Meezan Bank Limited was planning to raise up to Rs7 billion by issuing Tier 1 Islamic bond or Sukuk in the coming few months. Meezan Bank, has also recently signed a Memorandum of Understanding (MoU) with VPL Limited – a leading importer of trucks, buses, construction and mining equipment, generators and tools in Pakistan as their preferred financier.
“The issue will be first Shariah-complaint Tier 1 Sukuk in Pakistan, while the aim for selling a Sukuk from the bank is to shore up its capital adequacy ratio,” a source, familiar with the matter, told a national newspaper. “The bond will be issued by the way of book-building, possibly in June or July. The deadline for receiving expression of interest from the investors is May 30, 2018.”
An industry official said the Sukuk would be a privately placed, tradable, and unlisted based on Mudarabah structure – a type of investment management partnership. “The Sukuk will be offered to selected corporate entities – banks, financial institutions and pension funds etc,” the official added, while talking to the media.
The SSB carefully reviewed and discussed various solutions for addressing the excess liquidity situation of Islamic banks and provided guidelines regarding different proposals presented by the Management of Meezan Bank.
According to the details of the structure as provided by the source, the total issue would be Rs5 billion with a green show option of Rs2 billion. The minimum investment is set to be 1.0 million. Tenure is perpetual and can be converted into share as per central bank’s regulation.
The bond will offer profit payment monthly. The rate of return on the Sukuk will be 3-month KIBOR plus 1.75 percent based on profit weightages assigned in the Mudarabah pool. The bank expects the bond to be the oversubscribed due to its attractiveness to the Islamic banks, windows, Takaful companies, Mudarabah companies, pension funds, Shariah Compliant investment by companies and entities.
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The State Bank of Pakistan (SBP) and the bank’s board had already approved plans for the issuance. Shariah Supervisory Board (SSB) of Meezan Bank has approved a Bai Muajjal Sukuk transaction for the Bank to provide Shariah-compliant financing to the Government of Pakistan.
This was decided at the 38th meeting of Meezan Bank’s Shariah Supervisory Board (SSB) was recently held at Darul Uloom, Karachi under the Chairmanship of Justice (Retd) Muhammad Taqi Usmani, along with other members of the Shariah Supervisory Board; Sheikh Esam Mohamed Ishaq and Dr. Muhammad Imran Ashraf Usmani.
Meezan Bank’s Founding President and Chief Executive Officer, Irfan Siddiqui, senior management of the Bank and Al-Meezan Investment Management Limited were also present at the meeting. The meeting addressed the major issues and challenges of the Islamic banking industry with a keen focus on the critical challenges of liquidity management.
The total issue would be Rs5 billion with a green show option of Rs2 billion. The minimum investment is set to be 1.0 million. Tenure is perpetual and can be converted into share as per central bank’s regulation.
With the lack of Shariah-compliant liquidity management instruments or equivalent Government securities and money market instruments, Islamic banking operations in the country face a liquidity bottleneck which places them at a competitive disadvantage with respect to their conventional counterparts.
The SSB carefully reviewed and discussed various solutions for addressing the excess liquidity situation of Islamic banks and provided guidelines regarding different proposals presented by the Management of Meezan Bank.
The SSB also approved a Bai Muajjal Sukuk transaction for the Bank to provide Shariah-compliant financing to the Government of Pakistan. In addition, the Board was pleased to note that with assets under management worth over Rs100 billion under 24 different funds, plans, Meezan Bank’s subsidiary – Al-Meezan Investment Management Limited (AMIM) has outpaced almost all players of the mutual funds industry in terms of growth in assets under management.
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The SSB expressed satisfaction on AMIM’s progress and provided guidelines on various matters pertaining to the Asset Management industry. Meanwhile Meezan Bank has also recently signed a Memorandum of Understanding (MoU) with VPL Limited – a leading importer of trucks, buses, construction & mining equipment, generators and tools in Pakistan as their preferred financier. The MoU was signed by Mr. Arshad Majeed – Group Head, Consumer Finance, Meezan Bank and Mr. Waqar Asghar – CEO VPL Limited at a ceremony held at VPL Limited Head Office, Lahore.
As an authorized importer of Volvo & UD Trucks in Pakistan, VPL Limited’s collaboration with Meezan Bank will support the import of their heavy-duty truck models in the country; further enabling the dealer to offer a complete integrated transport solution to its customers. Meezan Bank shall further strengthen the company’s offering by providing priority processing time, financing of complete unit (truck & trailer), flexible financing terms, lease tenure up to 7 years and comprehensive Takaful coverage for all VPL customers.
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Under this MoU, Meezan Bank will be the preferred financier for UD Trucks supporting the long-haulage and construction segments in the country. Through Meezan Bank’s network of over 600 branches in Pakistan, VPL Limited will be able to leverage the Bank’s nationwide presence to enable greater penetration of its products in the local market.
Meezan Bank is the first and largest Islamic commercial Bank of Pakistan. The Bank is headquartered in Meezan House – Karachi, Pakistan. It has a network of over 600 branches in more than 159 cities of Pakistan. It commenced operations in 2002 when State Bank of Pakistan issued first-ever license for Islamic commercial banking. The Bank has a market share of 35% in Islamic banking industry of the country.