May 30, 2022: The Chairman, Securities and Exchange Commission of Pakistan (SECP) Aamir Khan suggests the establishment of a high-level Steering Committee tasked with charting an impactful roadmap for the future, encompassing all touchpoints of the Islamic finance ecosystem, to promote Islamic finance in the country.
He made this suggestion in his keynote address at the World Islamic Finance Forum's “Development of Islamic Finance Ecosystem for Global Prosperity” conference, organized by Center of Excellence in Islamic Finance (CEIF) on Monday.
It is notable here that a similar committee was formulated in 2013 for the promotion of Islamic banking in Pakistan. Aamir Khan also recommended a tax incentive for companies whose financing needs are principally met through capital market Islamic instruments. “This would be a preferred approach than to revive the erstwhile 2% flat incentive,” he said.
He noted that 'protection, justice, fairness and societal well-being' are the key goals of Islamic finance, and SECP has been focused on the promotion of Islamic financing with all these goals in sight, said Chairman Securities and Exchange Commission of Pakistan (SECP) in his keynote address at World Islamic Finance Forum's “Development of Islamic Finance Ecosystem for Global Prosperity” conference, organized by Center of Excellence in Islamic Finance (CEIF) on Tuesday.
He shared some of the milestones achieved by SECP in line with Islamic financing, including the listing of PHL energy Sukuk; launch of the first-ever Shariah-compliant ETF; approval of the first-ever Shariah-compliant developmental REIT; revamping of Commodity Murabaha platform at PMEX; licensing of 2 Shariah-compliant Housing Finance companies, and disbursement of over 43,000 subsidized loans by one Islamic NBMFC.
Emphasizing the role of financial sector regulators in promoting a culture of innovation and entrepreneurship in the Islamic finance space, he shared the example of SECP’s regulatory sandbox that encourages young entrepreneurs and nascent startups, to come up with creative solutions & products. He proposed a similar model exclusively for Islamic finance, through a collaboration of all relevant regulators.
SECP Chairman also said that despite these “isolated successes”, structural gaps still exist in the industry, and warrant a concerted national level thrust to understand and address the complete spectrum of financial needs of the population. He stressed on harnessing the role of capital markets, NBFCs and insurance sectors towards the development and expansion of the Islamic financial ecosystem.
Shedding more light on the structural deficiencies, Khan said that the financial landscape in Pakistan remains bank-centric, while the current policies focused on financial inclusion also remain rather credit-centric. This means that products and solutions like long-term savings, investments, pension, insurance protection, private equity, etc. are not getting adequate attention. Finally, the implementation of inclusion efforts has also mostly stayed limited to the urban centres, except for some microfinance lending activities.
SECP Chief also highlighted the need for digitalization in the Islamic financial ecosystem to get the system off the ground. “The recent growth spurts in the digital NBFC lending space must be replicated for broad-based Shariah-compliant financial inclusion,” he said.
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