Securities and Exchange Commission of Pakistan (SECP) Chairman Dr Tariq Hassan has said that member countries of Islamic Development Bank (IDB) should join hands in formulating a model law on Islamic finance, based on Shariah and best practices.
He represented Pakistan at a Seminar on 'Ten years Master Plan for Islamic Financial Services Industry', in Kuala Lumpur on Tuesday. The seminar was arranged by Islamic Financial Services Board, Malaysia, and was attended by financial experts from all over Islamic world.
Dr Tariq said that creation of 'Shariah Boards' had become necessary due to complete absence of any Islamic finance forum. The Islamic Ummah is now faced with an uphill task of creating a paradigm shift in how it perceives the development of Islamic financial services industry and that of Islamic capital markets in the long run.
The new set of legal framework must be comprehensive and should include all legal and regulatory aspects of contract law, company law, banking law, bankruptcy & insolvency law, tax laws and securities law.
Experiences in the area of Islamic finance from various jurisdictions must be pooled to make it effective, sustainable, robust and modern. Evaluation of specific risks and rewards of Islamic financial products must be highlighted, as Islamic finance is characterised with a unique partnership between shareholders, managers and depositors promoting social, moral and ethical obligations between the three partners.
Dr Tariq Hassan said that once a model law on Islamic finance is developed, it could be implemented in IDB member countries through self-regulatory organisations, like stock exchanges and financial sector monitoring agencies. It would be the prerogative of national governments to make adjustments to their existing conventional regulatory regimes to accommodate this law, he added.
He said that in a world marked with increased globalisation in trade and services, standardisation is the key to success.
A comprehensive model law on Islamic finance will help in removing impediments towards standardisation through unified common set of principles and objectives of regulation and operation of Islamic capital markets which could be adopted unilaterally by all Muslim countries. Increased investor awareness will result in greater acceptability of Islamic capital market products expanding their market share in future, he added.