The Securities and Exchange Commission of Pakistan (SECP) has approved a comprehensive Strategic Action Plan 2024-2026 to promote Islamic finance and phase out Riba by 2028. The initiative aims to transform non-bank financial sectors by enabling a smooth transition to Sharia-compliant financial practices.
Roadmap for Islamic Finance Growth
The Strategic Action Plan, prepared by the SECP’s apex committee, sets a roadmap for expanding Islamic finance across all sectors regulated by the SECP. The plan aligns with the 26th Constitutional Amendment, which mandates the elimination of Riba by January 1, 2028.
Under this plan, Islamic finance will be fully integrated into SECP-regulated sectors by December 2026. Following this, the SECP will develop a detailed conversion strategy to assist conventional financial institutions in transitioning to Islamic financial institutions.
Collaborative Approach
The apex committee, formed in 2023, played a pivotal role in drafting the plan. The committee is chaired by Mujtaba Ahmed Lodhi, Commissioner of the Specialized Companies Division (SCD). It includes representatives from key financial bodies such as the Pakistan Stock Exchange (PSX), Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), SECP policy heads, and industry experts.
This collaborative effort reflects the SECP’s commitment to fostering partnerships for the development of Islamic finance in Pakistan. The involvement of industry experts ensures that the plan addresses practical challenges and meets market needs.
Key Goals of the Plan
The plan focuses on several strategic goals, including:
- Expanding Islamic finance products and services across non-bank financial sectors.
- Encouraging innovation in Islamic financial instruments to attract investors.
- Building regulatory frameworks to facilitate the growth of Sharia-compliant financial institutions.
- Educating market participants on the benefits and principles of Islamic finance.
Significance of the Initiative
This plan is a landmark step toward fulfilling Pakistan’s constitutional commitment to eliminating Riba. By fostering the growth of Islamic finance, the SECP aims to create a more equitable financial system that aligns with Islamic principles. The initiative is also expected to enhance financial inclusion and attract investment from global Islamic finance markets.
Industry Response
The financial industry has welcomed the SECP’s initiative. Experts believe that the plan will provide clear guidelines for transitioning to Islamic finance. They also emphasize the importance of building investor confidence through transparent and well-regulated Islamic financial systems.
Future Steps
After implementing Islamic finance across all SECP-regulated sectors by 2026, the focus will shift to converting conventional financial institutions. The SECP plans to introduce a step-by-step strategy to assist banks, insurance companies, and other financial entities in aligning their operations with Sharia principles.
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