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Financial markets

SECP Introduces Infrastructure Schemes to Boost Pakistan's Economic Growth

Strategic Insights

— 2 min read

The Securities and Exchange Commission of Pakistan (SECP) has introduced a new category of mutual funds called "Infrastructure Schemes" to enhance the role of capital markets in financing long-term infrastructure projects in Pakistan. This step aims to address the country's significant infrastructure financing needs, estimated at around USD 15 billion annually. The new framework allows Asset Management Companies (AMCs) to classify infrastructure schemes as equity, debt, or hybrid funds, depending on the investment strategy. Eligible sectors include energy, transport, logistics, water, sanitation, communication, and social and commercial infrastructure.

Key Takeaways:

  • The SECP has introduced a new category of mutual funds called "Infrastructure Schemes" to finance long-term infrastructure projects in Pakistan.
  • The estimated financing needs for infrastructure projects in Pakistan are around USD 15 billion annually.
  • The new framework allows AMCs to classify infrastructure schemes as equity, debt, or hybrid funds, depending on the investment strategy.
  • Eligible sectors for infrastructure schemes include energy, transport, logistics, water, sanitation, communication, and social and commercial infrastructure.
  • The framework sets a minimum fund size of Rs. 100 million for perpetual schemes and at the close of the subscription period for closed-end schemes.
  • AMCs will be required to invest a minimum of Rs. 25 million in seed capital for closed-end schemes with a maturity of over three years.
  • Closed-end schemes can offer periodic subscription and redemption windows after one year, subject to clear terms in the offering documents.
  • The SECP has introduced a transparent fee structure, with management fees capped at 3% per annum for equity schemes, 1.5% for debt schemes, and a weighted average for hybrid schemes.
  • No sales load will be charged, although contingent load may apply for early redemption in closed-end schemes.
  • The initiative aims to bridge Pakistan's infrastructure financing gap by mobilizing long-term domestic savings.
  • The introduction of this category reinforces the SECP's commitment to fostering sustainable economic growth and deepening the capital markets to support Pakistan's development.

Statistics:

  • Estimated financing needs for infrastructure projects in Pakistan: around USD 15 billion annually.
  • Current infrastructure spending in Pakistan: 2.1% of GDP.
  • Global norm for infrastructure spending: 8-10% of GDP.
  • Minimum fund size for perpetual schemes: Rs. 100 million.
  • Minimum seed capital for closed-end schemes: Rs. 25 million.
  • Maximum management fee for equity schemes: 3% per annum.
  • Maximum management fee for debt schemes: 1.5% per annum.
  • Maximum management fee for hybrid schemes: weighted average.

Sources:

  • Securities and Exchange Commission of Pakistan (SECP)
  • Mutual Funds Association of Pakistan (MUFAP)
  • SECP's website.

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