ISLAMABAD : The Securities and Exchange Commission of Pakistan (SECP) has enforced the Shariah Governance Regulations 2018, in order to make full compliance in line with the spirit of the Article 38 (f) of the Constitution of Pakistan.
Under the regulations, no business will claim as Shariah compliant or as an Islamic financial institution unless it obtains certification for Shariah compliance from the SECP, said a press statement on Friday.
Certification will also be required for issuing a Shariah compliant security.
The jurisdiction of these regulations is the corporate sector, Shariah-compliant corporate sector, Islamic capital markets, Shariah-compliant securities, Islamic financial institutions, according to the notification issued here Friday.
The enforcement of a comprehensive framework for Shariah-compliant business is a major breakthrough to lay the foundation for a true Islamic financial and economic system, says a press release.
The regulations are in furtherance to the Senate’s resolution moved by Senator Shibli Faraz and unanimously passed on July 9, 2018, whereby the House recommended that the government should take necessary steps to abolish Riba at the earliest and at least 30 percent of the new government debts should be replaced with Shariah-compliant modes of financing.
The issuance of these regulations is a leap forward towards development of a long-term, sustainable Islamic financial market, corporate sector and capital market.
The regulations will help deepen Shariah-compliant businesses and financing and will set the momentum for an all-embracing use of Shariah-compliant securities for Shariah-compliant investments and financing as the regulations provide opportunity to every business irrespective of its size or line of business to become Shariah-compliant or to issue Shariah-compliant security listed or unlisted.
In this backdrop, these regulations have been introduced, which encompass a number of elements of Shariah governance necessary to execute Shariah compliance and to uphold the sanctity of Shariah in business and financial dealings and operational practices that will ensure long-term sustainability for the Islamic financial system to stay on sound footings.
They include certification for Shariah compliant companies and Shariah compliant securities, a comprehensive Shariah screening methodology for listed as well as for unlisted companies, internal and external Shariah audit, Shariah advisory, Shariah compliance, income purification and charity distribution mechanism.
The regulations will help achieve standardization, harmonization, and transparency in the business practices and operational aspects of Shariah-compliant businesses and Islamic financial institutions, implement uniform Shariah screening mechanism, and shall enforce a compliance driven governance.
At the same time, the regulations will make the collection and analysis of data on corporate sector’s conformity with Shariah possible.
They will enable the SECP to gauge the incidence of Shariah compliance and assess the Shariah compliant businesses’ universe in the corporate sector and capital markets of Pakistan.
The regulations will help curb the use of word Shariah or Islam by the businesses that entice investors for ulterior motives.
The regulations are critical for addressing the challenges such as restoring the shaken confidence of public and investors, and putting in place a viable long-term solution to avert a muddle in the guise of Shariah for the future.