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Pakistan, Mobilink Telecoms

Using an innovative local currency Islamic bond to expand mobile telecoms access in rural Pakistan

Pakistan Mobilink

Context
Pakistan’s mobile telecoms market is one of the largest in the world, however, access in rural and remote areas is limited. In 2014, Mobilink, Pakistan’s largest mobile telecoms provider, was keen to expand its network into remote areas however its access to finance was constrained due to the limited size of Pakistan’s debt capital markets, meaning lenders and investors had reached their regulatory limits in terms of exposure to Mobilink and the wider telecoms industry.

Project
GuarantCo was approached by Mobilink to provide a 980m Pakistani Rupee (US$9.2m) local currency guarantee to credit enhance the issuance of an innovative local currency sukuk (Islamic bond). the first of its kind in Pakistan. GuarantCo developed an innovative, structure for the transaction and its guarantee improved Mobilink’s local credit rating from AA- to AA+, attracting Islamic investors to invest in Mobilink and to support its expansion. As the first transaction of its kind, PIDG’s Technical Assistance Facility (TAF) supported the legal and regulatory work required to adapt sukuk rules to allow for a third party guarantee. 60% of the sukuk was taken up by investors new to Mobilink, this expanded investor base will reduce the cost of future borrowing, keeping Mobilink services affordable.

Impact
The project will improve access to mobile telecoms for 6 million people in rural and remote regions of Pakistan. Alongside its network expansion, Mobilink has partnered with United Nations Educational, Scientific and Cultural Organisation (UNESCO) to launch an SMS-based literacy programme for women in rural parts of Pakistan. TAF has contributed US$50,000 to expand this basic literacy support which will benefit a total of 6,000 women and girls living in some of Pakistan’s most remote and challenging regions. The success of the bond transaction strengthens Pakistan’s capital markets and delivers a template for similar transactions in the future.