SECP makes policy recommendation to implement Islamic stock trading

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has made a policy recommendation to implement Islamic stock trading to accelerate the growth of Islamic finance in regulated sectors.

This has been revealed by Tariq Naseem, Head of Islamic Finance Department, SECP during an interactive session/workshop on the Islamic Finance sector and SECP’s Regulatory Sandbox held here on Thursday at the SECP Headquarters.

Other SECP’s policy recommendations included encouragement to the

listed companies to get declaration as Shariah-compliant companies and also promote the Issuance of Shariah-compliant securities.

He informed there is no full-fledged primary law for Islamic financial industry except Modaraba Ordinance in Pakistan, reflecting a major challenge for the Securities and Exchange Commission of Pakistan (SECP) in implementation of the Islamic finance in SECP’s regulated sectors.

In this regard, the SECP is drafting a dedicated Islamic finance law.

The SECP highlighted SECP’s efforts on promoting Islamic finance and encouraging innovation within its regulatory domain.

Tariq Naseem, Head of Islamic Finance Department at SECP, gave an overview of Islamic Finance, its basic principles, and informed the participants about SECP’s efforts in developing local Islamic financial ecosystem. He also highlighted salient features of the recent diagnostic report on Islamic finance published by SECP, which has identified various impediments in the growth of Islamic Finance and policy recommendations needed for its development in the country.

The court has given time period of five years (2022-27) to the SECP for full-fledged implementation of the Islamic financial system in the country, he said.

Tariq Naseem informed that the asset size of the Modaraba sector is Rs 62 billion of 28 Modaraba companies in Pakistan. Except Modaraba Ordinance, there is no primary law of Islamic financial services in the country.

Data disclosed that the Takaful insurance premium market share is 13% of the total size of the insurance market as of December 31, 2021.

He highlighted that the major challenges in the implementation of the Islamic Finance included undocumented economy, low savings rate, fewer listed companies and that too with smaller free-floats, small number of active investors, lack of viable investment alternative, limited outreach, public confidence and lack of awareness and trained human resources.

Musarat Jabeen, Executive Director and Spokesperson of the SECP, while welcoming the participants informed them about various reforms initiated by the SECP in its efforts to facilitate financial inclusion and market expansion, with the objective to improve the business climate in Pakistan.

SECP Director Amina Aziz informed the attendees of SECP's Regulatory Sandbox initiative, which allows for live testing of new products, services, or business models not covered under existing laws. This program, launched in 2020, is now entering its fourth cohort, inviting applications covering both Islamic financing and conventional financing, with preference given to Shariah-compliant digital finance models.

Potential areas include crowd sourcing, liquidity management, nano-finance, small ticket savings, Sukuk fractionalisation, and any new Takaful model or digital intermediation in regulated Islamic financial services.

Copyright Business Recorder, 2023