Pakistan drafts rules for Islamic firms, securities

dubai — Pakistan’s capital market regulator has drafted governance rules that cover Shariah-compliant companies and securities, the latest government initiative aimed at developing the country’s Islamic finance industry.

The move by the Securities and Exchange Commission of Pakistan (SECP) marks the first time a regulator has defined comprehensive requirements for companies that deem themselves to be compliant with Islamic principles. Regulators across Asia and the Middle East, such as Malaysia and Bahrain, have typically focused their attention on Islamic banks, insurance firms and their financial products, but rarely ventured into corporations.

The rules represent a “quantum leap forward in cementing Islamic financial services, Shariah-compliant businesses and instruments”, the regulator said. Areas covered include certification of companies and securities, screening criteria and disclosure requirements.

The proposed rules, which are now open to public consultation, would help bring standardisation and transparency in the practices of Shariah-compliant businesses, the SECP said adding stakeholders have the opportunity to share their comments and suggestions within two weeks.

The absence of a regulator imposed governance framework has resulted in concerns raised around the adherence level of companies that claim to be Islamic, said Syed Abubakr, Shariah board member of Emaan Islamic Banking, a unit of Silk Bank. “The draft regulations bring clarity on many of the issues which used to be considered grey areas and were subject of hot debate.”

Such concerns have been raised in markets, including the UAE, where a firm has claimed its debt no longer complies with Islamic principles. Public confidence on sharia-compliant companies could increase because of the SECP rules, while also supporting industry training and academic programmes, Abubakr added. — Reuters