In a bid to align with major financial markets and drive shared prosperity, Pakistan is set to embrace the mainstreaming of Islamic finance, according to Federal Minister for Finance and Revenue, Ishaq Dar. Speaking at the international conference on Islamic Capital Markets (ICM), Dar outlined the country’s strategic plan to promote Islamic finance, emphasising the importance of a comprehensive financial inclusion strategy.
The event, jointly organised by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Securities and Exchange Commission of Pakistan (SECP), served as a platform to discuss the future of Islamic finance in Pakistan. Minister Dar applauded the SECP and the State Bank of Pakistan (SBP) for their efforts in establishing a well-developed regulatory framework for microfinance institutions, making Pakistan one of the few countries to achieve this feat.
Highlighting the growing global acceptance of Islamic finance, Dar asserted that major financial markets worldwide have already mainstreamed Islamic finance, positioning it parallel to the global financial system. He stressed that Islamic finance has the potential to address extreme poverty and foster shared prosperity.
SECP Chairman, Akif Saeed, echoed Dar’s sentiment and shared the aim to promote Islamic capital markets (ICMs) within the next two years. He revealed that numerous companies and financial institutions have expressed interest in launching Islamic services and products, demonstrating the increasing demand for Shariah-compliant financing options. Saeed also highlighted the measures taken by the SECP to promote the Islamic financial system, including comprehensive legal reforms through amendments to the Modarba Ordinance and the establishment of a separate window for Islamic products.
Governor of the SBP, Jameel Ahmed, emphasised the need for collaboration among regulators, financial institutions, industry players, and Shariah scholars to standardise Islamic financial contracts and simplify processes. Ahmed acknowledged the challenges faced by Islamic capital markets, such as gaps in institutional, legal, and regulatory frameworks, as well as a lack of efficient pricing mechanisms and diverse instruments and investors. He reaffirmed the commitment of the SBP and SECP to transform the financial sector into a Shariah-compliant system.
During the conference, SECP and AAOIFI solidified their commitment to collaboration by signing a Memorandum of Understanding (MoU) aimed at supporting the development of the Islamic banking and finance industry. This partnership signifies a concerted effort to strengthen the Islamic financial ecosystem in Pakistan.
To overcome obstacles in the development of Islamic capital markets, particularly the Islamic Debt Market, Governor Ahmed highlighted the challenge of converting public debt into Shariah-compliant instruments. However, he expressed optimism, noting that the SBP has established a working group to develop practical solutions, including alternate Shariah-compliant structures.
Published in The Express Tribune, May 30th, 2023.
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