The Securities Exchange Commission of Pakistan (SECP) is in the process of drafting a Shariah regulatory framework and for the first time provision of a "Shariah compliant company" has been given in the draft Companies Bill, 2016. Addressing at the second day of "World Islamic Finance Forum" (WIFF), organized by Center for Excellence in Islamic Finance (CIEF) and Institute of Business Administration, here Tuesday, SECP Chairman Zafar Hijazi said SECP has already established a dedicated and full-fledged Islamic finance department to co-ordinate and spearhead the Islamic finance initiative.
Talking about the government policies, he said the government's economic liberalisation and investment friendly policies have a tremendous positive impact on the market as not only investor confidence getting restored, consequent to key regulatory and enforcement measures, new avenues for investment and fund-raising have also opened.
"Presently, Pakistan is being ranked as a growing and emerging regional economic power, witnessed by mega trade and infrastructure partnerships secured by Pakistan, and endorsed by global financial market experts, rating agencies and investment decision tools providers," he added.
He said investment conditions have considerably improved and more and more foreign investors and strategic partners from brotherly Islamic countries are expressing their interest in the financial sectors of Pakistan. Hijazi said SECP is fully supporting Shariah compliant business and the government has implemented the SECP's tax proposal for offering Sukuk a level playing field with bonds through an ordinance dated 31st August, 2016.
Earlier, the Finance Minister had accepted the SECP proposal for offering a 2 percent tax rebate as an incentive for companies meeting Shariah compliance criteria. Companies are being given both a financing option and a tax incentive to become Shariah compliant and now it is for companies to make the most of this opportunity, he added.
In order to provide a level playing field, the SECP is diligently working towards harmonisation and standardisation of regulations thus enabling all market players to benefit from a uniform regulatory environment, he said. Earlier this year the SECP adopted 4 Shariah standards of AAOIFI and this is an ongoing process where the objective is to adopt and comply with maximum Shariah and accounting standards set by AAOIFI and the IFSB, chairman SECP informed.
The commission has an independent Shariah Advisory Board consisting of renowned Shariah scholars of Pakistan to review product development and adjudicate on Shariah matters, he said and added that over the last one year the SECP, in consultation with the Shariah Board, has reviewed and approved products and documentation for the Pakistan Mercantile Exchange, SECP employees housing finance and mutual funds.
"Islamic finance is featured as a top priority in the agenda of our investor education and capacity building program. The SECP staff is attending NIBAF's Islamic finance certifications and other training programs on a frequent basis," Hijazi maintained.
He said that the widespread recognition and adoption of Islamic finance in the business sectors stems largely from its inherent ability to promote economic wellbeing, maximisation of social and economic justice and provision of socio-economic opportunities for the masses. It has the potential to help address the challenges of ending extreme poverty and boosting shared prosperity, he added.
"The great potential of Islamic finance in financial and capital markets is being unleashed with recognition of its distinct dimensions, innovative financial solutions, and financial facilitation that it offers," he said.
Islamic financial services and instruments in financial and capital markets now have great appeal to investors from Islamic as well as other countries. This can be witnessed by the phenomenal growth in the Islamic mutual funds industry which represents 30% of the total mutual funds market share as at June, 2016, he added.
"We are focusing on extending market outreach and promoting investor protection so that more and more investors are willing to participate in the market, thereby bolstering the desired activity and generating liquidity," the SECP chairman said. He extended gratitude and appreciation to IBA and Dr Ishrat Hussain for organising the forum in Pakistan for the first time. He believed that this forum comes at the opportune time in the context of two recent developments regarding development of Islamic capital market.