PIA - Pakistan International Airlines (PK, Islamabad Quaid-e-Azam Int'l) could raise up to PKR20 billion rupees (USD124 million) through a sukuk, or Islamic bond, with Karachi-based privately-owned BankIslami Pakistan acting as adviser and joint bookrunner, The News International newspaper reported on October 20.

The bank’s president and chief executive, Amir Ali, told the daily: “We are coming up with a privately-placed listed sukuk for the aviation industry in addition to Islamic commercial papers and a short-term sukuk.”

He did not disclose the name of the issuer, but the newspaper surmised that it was clear the beneficiary would be PIA.

Other sources confirmed to The News that the proceeds from implementing the measure would help to stem the state-owned flag carrier’s significant losses.

“Since the sukuk would be backed by a Government of Pakistan guarantee, and since the issuer is also majority government-owned, it may be classified as a sovereign sukuk,” Ali said.

The bank president explained that Islamic finance in Pakistan is growing at a fast rate and so is demand for investment products such as sharia-compliant bonds. Islamic finance now accounts for more than 16% of all banking assets in Pakistan and is expected to grow to 20-25% by 2023.

“The point to be noted is that the sukuk industry has always been lucrative and is one of the most venerated modes of raising funds,” he said. “The regulators are immensely supportive of Islamic banks in the development of the debt capital market in Pakistan and upgrading the overall investment standards.”