DUBAI: The State Bank of Pakistan has adopted a global standard for sukuk (Islamic bonds), which could help Pakistani issues attract investment by foreign institutions from the Gulf and elsewhere.
Issuers will have to comply with the “investment sukuk” guidelines of the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), or face penalties, the central bank said in a statement.
AAOIFI is one of the main standard-setting bodies for Islamic finance, which follows religious principles such as ban on interest and pure monetary speculation.
Around the world, the industry commonly refers to AAOIFI standards but they are mostly used as guidelines rather than mandatory rules since they are not enforceable in every jurisdiction.
Bahrain is one of a handful of countries which enforces them fully, while countries such as Oman refer to a portion of them.
Pakistan’s regulators are rolling out new rules in an effort to increase Islamic banks’ share of the total banking sector to 15% by 2017. Islamic banks held Rs847 billion ($8.44 billion) or 8.7% of total banking assets in March this year, central bank data shows.
Despite double-digit growth, the industry has missed growth targets set by regulators: forecasts set out in 2007 expected the industry to reach Rs907 billion by the end of 2012.
In May, the Securities and Exchange Commission of Pakistan established a Shariah advisory board to oversee Islamic financial instruments, while last year it announced rules for sukuk, takaful (Islamic insurance) and Islamic deposits.
Published in The Express Tribune, July 18th, 2013.
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