KARACHI: The financial closing of the PKR4.76 billion 10-year Islamic Syndicated Term Finance Facility in favor of Air Link Communication Limited and Select Technologies Limited has been successfully achieved by a consortium of financial institutions led by Bank of Punjab, with the guarantee of InfraZamin Pakistan Credit Guarantee. This deal has become the first ever Islamic financing of Air Link Select Technologies Pakistan and has established a new benchmark in Shariah-compliant blended financing in the manufacturing industry of Pakistan.
This facility will help finance the expansion of world-class manufacturing facilities at the Sundar Green Special Economic Zone to boost local production of smartphones, consumer electronics, and home appliances through the import substitution strategy in Pakistan.
What the Facility Funds And What It Creates
The Air Link Select Technologies Islamic financing Pakistan operation achieves impact through all of the following four aspects simultaneously:
Manufacturing growth:
In each case, a modern manufacturing plant will be built at Sundar Green SEZ, resulting in increased manufacturing locally of smartphones, LED TVs, air conditioners, and household appliances through strategic collaboration with Xiaomi and Hisense.
Digital Inclusion:
This will allow the project to produce more than one million affordable smartphones every year, thus improving the digital connectivity of Pakistani people who currently cannot afford imported handsets in the marketplace.
Employment creation:
The project will create about 450 job opportunities within a period of five years, with 25 to 30 percent of them going to females. Gender inclusion will thus be incorporated in the hiring of staff at this facility from the outset.
Contributions to the climate:
It is projected that the installation of a 1 MW solar power station on-site will contribute towards reducing CO2 emissions by about 700 tonnes a year. This will decrease costs whilst promoting a climate-sensitive energy production system.
Leadership Voices on the Transaction
“The 10-year financing structure, which is guaranteed by the InfraZamin credit insurance scheme, would be very instrumental in fostering innovations, launching new products, and most importantly providing employment opportunities to the youth of Pakistan, particularly women.”
Muzzaffar Hayat Piracha, CEO, Air Link Communication Limited
“This plant will generate employment, increase digital inclusion, and offer possibilities of export. We are working together to enable the expansion of local production capacity, create employment opportunities, foster digital inclusion, and build a stronger economy.”
Maheen Rahman, CEO, InfraZamin Pakistan Limited
ALSO READ: Islamabad Police Departments Mark Milestone in Electric Mobility Adoption with BYD EVs
Why InfraZamin’s Guarantee Changes Everything
The example of Air Link Select Technologies Islamic financing Pakistan deal reveals what can be unlocked by development finance institutions participating in business deals as guarantors instead of lending directly.
Without PKR3.57 billion guarantee of InfraZamin, the consortium of banks would have to make either shorter-term financing available, restricting the size of the investments in manufacturing projects, or reject the transaction completely due to its 10-year maturity period.
This is where the guarantee comes into play. The guarantee takes on board the tail risk that has rendered long-tenor finance for manufacturing operations undesirable for commercial banks due to Basel regulations, thus channeling private finance to precisely the type of industrial investments required by Pakistan’s import-substitution strategy.
“This deal highlights the increasing importance of blended finance in enabling strategic investments in industries by mobilizing private long-term capital.”
-Syed Muhammad Danial Shah, Head of Investment Banking, Askari Bank Limited
Pakistan’s Electronics Manufacturing Moment
This is because the financing structure for the Air Link Select Technologies Islamic facility in Pakistan comes after the success of the Select Technologies IPO; a sequence that shows the two-track approach of the company of raising money from the capital markets and also through debt.
The PKR4.76 billion plant is indicative of how bankable finance structures can be created for visionary indigenous manufacturers, and how the credit enhancement strategy employed by InfraZamin can help generate the necessary long-term funding required by manufacturing expansion projects but which has not previously been available through the country’s commercial banking sector.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
