KARACHI: The Securities and Exchange Commission of Pakistan (SECP) announced on Thursday it would host the first international conference on Islamic capital markets (ICM) in May with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
The one-day conference, scheduled to be held on May 29, 2023, aims to define the future direction for Islamic capital markets in light of the recent judgement of the Federal Shariat Court (FSC) and the fast-changing dynamics of the financial market.
Pakistan’s Federal Shariat Court, responsible for ensuring all laws in the country are in harmony with Islamic law or Shariah, has given the government until December 2027 to completely eliminate Riba (interest) from Pakistan’s banking system.
"ICM developments with ecosystem completion: innovation, growth, and transformation" is the theme chosen for this year's conference.
“Eminent speakers, policymakers, and experts of the global Islamic financial services industry from Bahrain, Malaysia, Saudi Arabia, Turkiye, UAE and UK are expected to participate in the conference,” the SECP said.
AAOIFI is a Bahrain-based, global body entrusted with ensuring the soundness and stability of the Islamic financial services industry, which includes banking, capital markets, and insurance/takaful.
So far, AAOIFI has issued over 115 standards in Shariah, accounting, auditing, ethics, and governance, which are adopted in different shapes and forms in no less than 47 jurisdictions and 41 countries globally.
The expansion of the Islamic finance sector on a global scale has led to it becoming a substantial industry valued at $3.06 trillion. Islamic banking makes up the majority of the industry with a share of about 69%, while Islamic capital markets make up 30% and Takaful holds less than 1% of the market, according to AAOIFI.
Within capital markets, Sukuk accounts for more than 25 percent of the market share and remains the most developed and active sector.
The size of the Islamic finance industry in Pakistan is also estimated to have surpassed $42 billion at the end of the first quarter of 2022.
“The exponential growth of Islamic finance in Pakistan has posed, among other challenges, capacity-building and awareness-creation challenges for the financial market regulators,” a statement by the AAOIFI said.
The Islamic capital market in Pakistan is witnessing renewed interest in Sukuk issuances and the growth of Islamic mutual funds, pension funds, and REITs (Real Estate Investment Funds).
Non-banking institutions like modarabas, housing finance companies, microfinance companies, and others offering Islamic financial services, including takaful and window takaful operators, are also making inroads in the Islamic financial services industry in Pakistan.
Collectively, these entities are completing the required Islamic finance system in the country, paving the way for the economy's Islamization.
In the light of the SECP’s diagnostic report on non-bank Islamic finance in Pakistan, a comprehensive action plan has been formulated to address key issues, the AAOIFI said.
The action plan, according to the AAOIFI, would also take strategically important steps, and pave the way for the transformation of the Islamic financial system in the country in light of the constitutional requirement and the above-referred FSC’s judgment.
