Non-bank financial sectors: SECP approves strategic action plan for Islamic finance development

ISLAMABAD: The Strategic Action Plan of the Securities and Exchange Commission of Pakistan (SECP) aims to enable Islamic finance across all regulated sectors under the purview of SECP by December 2026.

The SECP has approved a Strategic Action Plan 2024-2026 to facilitate the growth and development of Islamic finance in non-bank financial sectors.

The plan was prepared by the SECP’s apex committee chaired by Mujtaba Ahmed Lodhi, Commissioner-SCD, established in 2023 with representation from the Pakistan Stock Exchange (PSX), Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), SECP policy department heads, and industry experts. This collaborative effort aimed to create a comprehensive roadmap for Islamic finance growth aligning with the recent 26th Constitutional Amendment, which mandates the elimination of Riba by January 1, 2028.

This Strategic Action Plan aims to enable Islamic finance across all regulated sectors under the purview of SECP by December 2026. Subsequent to enablement, a conversion plan and strategy will be formulated to facilitate the transition of conventional financial institutions to Islamic financial institutions, ensuring a seamless transition and minimizing disruptions to the financial sector.

The plan focuses on four key verticals: (i) Growth Acceleration, increasing Islamic finance's share in regulated sectors; (ii) Achieving Standardization, promoting consistency and harmony in Islamic financial practices; (iii) Improved Quality, enhancing the overall performance and efficiency of Islamic financial institutions; and (iv) Strengthening Legal Framework, providing a robust foundation for Islamic finance to flourish. These verticals will facilitate the expansion of Islamic financial institutions, assets, and services in the non-bank sector.

The Strategic Action Plan has undergone rigorous review and consultation with Capital Market Infrastructure Institutions (CMIIs) to ensure its effectiveness and applicability. Leveraging the expertise of CMIIs, the SECP aims to create a conducive regulatory environment for Islamic finance, fostering its growth and development. The SECP reaffirms its commitment to providing a supportive regulatory environment for Islamic finance, aligning with the country's constitutional and legal requirements.

Copyright Business Recorder, 2024