November 2, 2018: In line with the spirit of the article 38 (f) of the Constitution of Pakistan, the SECP has enforced the Shariah Governance Regulations 2018.
The jurisdiction of these regulations is the corporate sector, Shariah-compliant corporate sector, Islamic capital markets, Shariah-compliant securities, Islamic financial institutions, explicit the notification issued on November 2, 2018. The enforcement of a comprehensive framework for Shariah-compliant business is a major breakthrough to lay the foundation for a true Islamic financial and economic system.
The regulations are in furtherance to the Senate’s resolution No. 393 moved by Senator Shibli Faraz and unanimously passed on July 9, 2018, whereby the house recommended that the government should take necessary steps to abolish riba at the earliest and at least 30% of the new government debts should be replaced with Shariah-compliant modes of financing.
These regulations encompass a number of elements of Shariah governance necessary to execute Shariah compliance in business and financial dealings and operational practices. They include certification for Shariah compliant companies and Shariah compliant securities, a comprehensive Shariah screening methodology for listed as well as for unlisted companies, internal and external Shariah audit, Shariah advisory, Shariah compliance, income purification and charity distribution mechanism.
These regulations will also make the collection and analysis of data on corporate sector’s conformity with Shariah possible. They will enable the SECP to gauge the incidence of Shariah compliance and assess the Shariah compliant businesses’ universe in the corporate sector and capital markets of Pakistan.
The regulations will help curb the use of word Shariah or Islam by the businesses that entice investors for ulterior motives. Henceforth, no business will claim as Shariah compliant or as an Islamic financial institution unless it obtains certification for Shariah compliance from the SECP.