The Securities and Exchange Commission of Pakistan (SECP) Chairman Akif Saeed said the adoption of regulatory compliance at Pakistan’s capital markets is at par with global standards, suggesting the country carries high potential to become a leader in Shariah-compliant financing.
While addressing a press conference to unveil details on the upcoming second international conference on ‘Islamic Capital Market’ later this month by the SECP, Saeed said an internal assessment suggested the level of compliance in line with global standards jumped to 90% at local capital markets e.g. Pakistan Stock Exchange (PSX) last year.
SECP, Head of Islamic Finance, Tariq Naseem said the level of compliance of Pakistan’s capital markets with the International Organisation of Securities Commissions (IOSCO) principles for securities regulation was earlier assessed at 86% in an independent international assessment conducted in 2015 and 2018.
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He mentioned that the SECP now plans to have an assessment of compliance with the Islamic Financial Services Board’s (IFSB) principles for Islamic capital markets, which is expected to further enhance the global standing of Pakistan in Islamic finance.
Naseem elaborated that the SECP’s regulated sectors in Islamic finance already made considerable progress.
Shariah-compliant segments now constitute a major portion of capital markets. Some 55% of market capitalisation at the PSX is Shariah-compliant, 48% of assets under mutual funds’ management is Shariah-compliant, 65% of assets of voluntary pension funds and 95% of real estate investment trusts (REITs) are already Shariah-compliant, according to Naseem.
The fast developing Shariah-compliant financial markets in the country suggest “Pakistan carries a high potential to become a global leader in Islamic financing,” he said.
Akif Saeed further said Pakistan-based unlisted firms have raised Rs500 billion through selling Sukuk (Shariah-compliant bonds) since 2022, implying that the demand for Islamic financing stands already high in the domestic market and financial institutions are required to work on supply side.
Besides, the government raised new financing worth Rs1.5 trillion through selling sovereign Sukuks at Pakistan Stock Exchange (PSX) over the last one-year.
The PSX provided the required financing after the interim government helped developing the debt market at the PSX in the recent past, he said.
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SECP chief said the commission is working in collaboration with the State Bank of Pakistan (SBP) and the Pakistan Banks’ Association (PBA) to address issues in the Shariah-complainant secondary bond market.
In the next phase, the regulators are about to implement the agreed solutions. The work would pave the way for increased participation from retail investors, as it remained a transparent market which is also maintaining confidentiality with respect to the taxation of the investors as well, he added.
Saeed said three sectors of the economy including agriculture, small and medium enterprises (SMEs) and housing are creating high demand for the Shariah-compliant financing.
Pakistan is on the way of transforming the entire economy on Islamic financing on the targeted timeline of 2028. Faisal Bank has already transformed onto Shariah-compliant banking. Other banks and two asset management companies (AMCs) are also on the way of transforming their financing model on Islamic principles.
The second international Islamic Capital Market conference 2024 is being organised by the SECP in collaboration with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Development Bank Institute (IsDBI).
It is scheduled to be held on December 12, 2024 in Karachi.
More than 20 distinguished international experts and policymakers from countries including Bahrain, Saudi Arabia, Nigeria, Malaysia, Türkiye, Oman, Iran, and the United Kingdom are expected to attend the conference.
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