SECP seeks to raise Shariah-compliant debt share from 13pc to 20pc

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has noted that Shariah-compliant instruments currently make up just 13 percent of Pakistan’s debt market, and aims to raise their share to 20 percent by 2028.

According to the white paper on the first international capital markets conference (ICMC) issued by the SECP on Friday, the panel explored key pathways for deepening Pakistan’s capital markets through the expansion of both equity and debt participation. Speakers emphasized the urgent need to revive the corporate debt market by reducing issuance costs, strengthening regulatory infrastructure, and expanding the availability of Shariah-compliant products. International examples, such as Indonesia’s successful sukuk program and China’s advances in derivatives innovation, were cited as adaptable models for Pakistan. The discussion also underscored the growing role of fintech, exchange-traded funds (ETFs), and structured products in broadening both retail and institutional participation, supported by enhanced financial literacy initiatives, AI-enabled investor outreach, and targeted legislative reforms to mobilize long-term capital.

The panel noted that Shariah-compliant instruments currently account for only 13 percent of Pakistan’s debt market, with a stated objective to increase this share to 20 percent by 2028. These products are often priced more competitively than conventional bank financing, yet their market presence remains limited. However, there is a strong need for prioritizing measures to reduce intermediation and frictional costs, alongside initiatives to introduce corporate bond swaps, which are currently absent from the market.

Despite efforts to encourage more frequent listings, the national average remains at approximately five corporate issuances per year, well below the market’s potential. While the corporate debt market was more dynamic before 2008, it is now widely perceived as riskier and more complex than bank financing. Panellists emphasized the need to improve market incentives, clearly articulate the value proposition of corporate debt, and address the crowding-out effect created by government securities. Although sufficient investor appetite exists, suitable and well-structured instruments must be developed to meet this demand.

Attracting long-term institutional capital was identified as contingent upon modern market infrastructure, robust regulatory frameworks, greater investor awareness, and clear pathways for preparing listing-ready companies. The panel highlighted the need for tailored debt funds and structured products to meet the requirements of insurers and other institutional investors.

International experiences, ranging from fintech-enabled retail participation in India to ETF-driven liquidity enhancements in Morocco, were cited as practical reference points. To further attract foreign investors, speakers stressed the importance of deepening derivatives markets. China’s model, including its network of specialized futures exchanges, carbon futures linked to electric

vehicle growth, and insurance-plus-futures products, was presented as offering actionable insights, alongside opportunities for technical training and capacity building, SECP’s white paper added.

Copyright Business Recorder, 2026