Client Name

Pakistan Stock Exchange

Faculty Advisor

Dr. Irum Saba, Associate Professor & Program Director MS-IBF, Institute of Business Administration, Karachi

SBS Thought Leadership Areas

Islamic Business and Finance

SBS Thought Leadership Area Justification

Our ELP on Short-Term Sukuk Structures for Pakistan Stock Exchange directly supports SBS’s Islamic Banking and Finance leadership by addressing Pakistan’s urgent need for Shariah-compliant liquidity solutions. With the 2027 transition deadline looming (Page 5), our research proposes three practical Sukuk models—Tijarah, Running Musharakah, and Rotation Ijarah (Pages 42–52)—that leverage underutilized government assets to create tradable, short-term alternatives to conventional T-bills. These solutions align with SBP’s Vision 2028 and tackle systemic challenges like circular debt (PKR 2.4 trillion, Page 5), embodying SBS’s focus on ethical, asset-backed financial innovation.

The project also advances SBS’s thought leadership in regulatory and market development. By identifying barriers such as non-tradable Sukuk structures (Page 31) and advocating for reforms—centralized Shariah governance (Page 54) and market-making mechanisms (Page 39)—we bridge theory and practice. Our engagement with regulators (SECP, SBP), scholars, and industry experts ensures the proposals are both Shariah-compliant and operationally viable, reinforcing SBS’s commitment to actionable Islamic finance solutions.

Aligned SDGs

GOAL 8: Decent Work and Economic Growth

Aligned SDGs Justification

This project on short-term Sukuk structures directly supports SDG 8 (Decent Work and Economic Growth) by strengthening Pakistan’s Islamic financial system and promoting sustainable economic development. The proposed Sukuk models—Tijarah, Running Musharakah, and Rotation Ijarah—address critical gaps in liquidity management, enabling Islamic banks and businesses to access Shariah-compliant short-term financing. By replacing conventional interest-based instruments with asset-backed alternatives, the project fosters financial inclusion and stability, aligning with SDG Target 8.10, which emphasizes strengthening domestic financial institutions.

Additionally, the research contributes to SDG Target 8.1 by enhancing Pakistan’s capital market efficiency, facilitating economic growth through innovative Islamic finance solutions. The focus on tradable, short-term Sukuk helps mobilize domestic resources, supports entrepreneurship, and reduces reliance on debt-based systems—key pillars of sustainable economic progress. By bridging regulatory and operational challenges, this project not only advances Pakistan’s transition to a riba-free economy but also promotes equitable and resilient financial ecosystems in line with SDG 8’s broader objectives.

NDA

No

Abstract

This report examines the development of Shariah-compliant short-term Sukuk as viable alternatives to conventional Treasury Bills in Pakistan, where the financial sector is transitioning to an interest-free system by 2027. Despite growing demand, Pakistan’s Islamic banking sector faces structural, regulatory, and liquidity challenges due to the lack of tradable short-term instruments. The study proposes three innovative Sukuk models—Tijarah-based Sukuk (commodity-backed with 51% inventory retention), Running Musharakah Sukuk (profit-sharing working capital financing), and Rotation Ijarah Sukuk (lease-based with auction exits)—to enhance liquidity while ensuring Shariah compliance. Through comparative analysis of global frameworks (Malaysia, Bahrain) and primary research with scholars and practitioners, the report identifies key barriers, including asset scarcity, non-tradability of debt-based structures, and institutional resistance. Recommendations include establishing a sovereign asset register, regulatory reforms for secondary-market liquidity, and pilot programs to test the proposed models. By bridging theory and practical implementation, this research contributes to Pakistan’s Islamic finance evolution and offers scalable solutions for emerging markets facing similar challenges.

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project- Towards Shariah Compliant PSX

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