The Pakistan Credit Rating Agency PACRA Credit

Transcript:The Pakistan Credit Rating Agency PACRA Credit:
The Pakistan Credit Rating Agency PACRA Credit Ratings For Islamic Instruments May 07’12 1 ADNAN AFAQ MD PACRA About PACRA 1. PACRA, Pakistan’s first rating agency – 1994 Banks AMC Insurance Refineries IPPs Corporate Sukuks 2. JV : IFC + Fitch Ratings + Lahore Stock Exchange 3. To date + 1,500 rating opinions Rated 85% of debt instruments in Pakistan 4. Recognized by Apex Regulators – Pakistan & Bangladesh 5. Development work for World Bank: Bond Market - NBFI sector 6. We do: Risk Advisory, Specialized Training on Risk Management Corporate Governance Assessment (IFC model) 2 Development of Credit Ratings Coverage of rating agencies (~ 90% of World GDP) 3 Why Credit Rating? Bank Deposits Tax Payers’ money Listed Companies Insurance Real Estate Projects Mutual Funds 4 Whenever Public Money is invested Disclosure of Risk & Return is imperative Risk & Return Correlation Transparency: Independent view of risk Why Credit Rating 5 Management Investor Regulators Market condition Market action/inaction Not possible to capture without quantification Matching of Risk & return Identify Risk Factors Enterprise Risk level Systemic Risk Transparency Relative Position Greater Access to Capital Timely Action Crux of Islamic Finance Transaction must have real economic purpose No undue speculation allowed [Gharar] No exploitation or sinful activities permitted Underlying concept: Sharing of risks & rewards Riba: Interest & other Unlawful gain are prohibited 6 World Sukuk Markets Total Sukuk Size: $215 b outstanding Source: www.zawya.com 7 World Sukuk Markets Main Players: Malaysia (60-70% of new issuances globally) Saudi Arabia UAE Pakistan Latest happenings Malaysia- Largest Islamic bond Plus highway $10bbn Saudi Arabia- rise in activity: Civil Aviation, Saudi bin Ladin SATORP South Africa- Treasury Sukuk proposition Thailand- Tax Incentive Oman- Infrastructure Sukuk proportion Japan- Changes in tax & stamp duties Ireland- Finance Bill 2010 facilitate Islamic Finances Preparing Launch Azerbaijan Kazakhstan Australia India Japan Singapore Nigeria Ireland 8 Resembles a conventional lease agreement Late payment charges paid to charity Financier commissions the construction/manufacture of asset Simultaneous forward Ijara agreement Sale of agreed asset at cost plus agreed profit margin Provides liquidity to the customer Funds entrusted with a corporate for use in pre-agreed business Profit & loss sharing Similar to Mudaraba but this is an equity stake Profit & loss sharing Introduction to Sukuks 9 Plural of Sak – meaning ‘certificates’ in Arabic Beneficial ownership interest in a tangible asset &/or resulting cash flows Risks associated with structure type Sukuk