SECP allows money market funds to invest in one-year GIS Sukuk

 December 20, 2025 (MLN): In a significant regulatory move aimed at deepening Pakistan’s capital markets, the Securities and Exchange Commission of Pakistan (SECP) has allowed money market mutual funds to invest in one-year Government of Pakistan (GoP) Ijarah Sukuk (GIS).

The Sukuk must be listed and traded on the Pakistan Stock Exchange (PSX) and will be subject to specific regulatory safeguards.

The decision was informed through a circular issued by SECP’s Specialized Companies Division, replacing earlier directions issued in 2023 and 2024 on the categorization of open-end Collective Investment Schemes (CIS).

The circular is part of SECP’s broader effort to enhance capital market depth while encouraging wider participation of mutual funds in Shariah-compliant government instruments, particularly the one-year GIS.

Under the revised framework, Asset Management Companies (AMCs) are now permitted, on behalf of their money market schemes, to invest in one-year GIS with maturity exceeding six months and up to one year, provided the investment adheres to strict maturity and disclosure requirements.

While granting the relaxation, the regulator has retained the conservative risk profile of money market funds by imposing the following conditions:

• Weighted Average Time to Maturity (WAM):
  The weighted average time to maturity of the net assets of a money market fund, including government securities, must not exceed 90 days, ensuring continued liquidity and low-risk positioning.

• Enhanced Disclosure Requirements:
  Monthly fund manager reports must clearly disclose the actual exposure to one-year GIS, calculated as a percentage of net assets, improving transparency for investors.

• No Change in Risk Profile:
  All other conditions applicable to money market schemes, particularly those governing risk profile, will remain unchanged under existing regulations, circulars, and directions.

SECP stated that the decision has been taken under its powers conferred by Section 282B(3) of the Companies Ordinance, 1984, read with Regulation 55(2) of the Non-Banking Finance Companies and Notified Entities Regulations, 2008.

The circular has been issued with immediate effect and has been circulated to chief executive officers of asset management companies, the Mutual Funds Association of Pakistan (MUFAP), and trustees of collective investment schemes.

This move is a meaningful step toward increasing liquidity and demand for government Sukuk while providing money market funds with slightly enhanced yield opportunities, without compromising their low-risk mandate.

Regulator aims to boost Pakistan’s Islamic capital market by permitting controlled exposure to longer-term Islamic instruments.

Retail investors in money market funds will stay protected via strict maturity limits and disclosure requirements.

Copyright Mettis Link News