Pakistan is positioning itself to take the lead in the global Islamic finance sector, with the Securities and Exchange Commission of Pakistan (SECP) Chairman, Akif Saeed, emphasizing the country’s growing dominance in Shariah-compliant financing. In a recent press conference, Saeed revealed that Pakistan’s capital markets now boast a compliance rate of 90%, aligning closely with international standards, setting the stage for the nation’s emergence as a global hub for Islamic finance.
This announcement comes ahead of the much-anticipated second international Islamic Capital Market conference, scheduled to take place in Karachi on December 12, 2024. The event, organized in collaboration with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Development Bank Institute (IsDBI), will see over 20 international experts and policymakers come together to discuss the future of Islamic finance and its role in the global economy.
According to Saeed, the SECP has made substantial progress in aligning Pakistan’s regulatory framework with global standards. In 2023, the SECP’s internal review indicated a compliance rate of 90% with the International Organisation of Securities Commissions (IOSCO) principles. This is a notable improvement from previous independent assessments in 2015 and 2018, which recorded compliance at 86%. This progress underscores Pakistan’s commitment to enhancing its regulatory framework to foster investor confidence and drive growth in the Islamic finance sector.
Saeed also highlighted the SECP’s focus on assessing compliance with the Islamic Financial Services Board’s (IFSB) principles. This move is expected to further enhance Pakistan’s standing in the international Islamic finance community. Tariq Naseem, the SECP’s Head of Islamic Finance, added that the commission’s ongoing efforts will solidify the country’s position as a leader in Shariah-compliant financing.
Islamic finance has become a pivotal component of Pakistan’s capital markets, with significant growth in Shariah-compliant assets across various sectors. At the Pakistan Stock Exchange (PSX), 55% of market capitalization is now Shariah-compliant, reflecting the increasing demand for ethical investment options. Moreover, 48% of mutual fund assets, 65% of voluntary pension fund assets, and 95% of real estate investment trusts (REITs) are also aligned with Islamic principles, further cementing Pakistan’s position as a growing Islamic finance hub.
The country’s commitment to Islamic finance has been further bolstered by a surge in Sukuk issuances. Since 2022, unlisted companies in Pakistan have raised PKR 500 billion through Sukuk, while the government has successfully secured PKR 1.5 trillion through sovereign Sukuk at the PSX over the past year. This growth in Sukuk issuance is seen as a key driver in expanding Shariah-compliant financial instruments in the country.
Efforts are also underway to strengthen Pakistan’s Shariah-compliant secondary bond market. The SECP is collaborating with the State Bank of Pakistan (SBP) and the Pakistan Banks’ Association (PBA) to introduce measures aimed at increasing retail investor participation and ensuring greater market transparency. These initiatives are expected to enhance the accessibility and appeal of Shariah-compliant financial products to a broader segment of the population.
Looking ahead, the SECP has set a bold goal to transition Pakistan’s entire financial system to Islamic financing by 2028. Faisal Bank has already adopted a Shariah-compliant model, and other financial institutions and asset management companies are following suit. This shift is part of a broader strategy to align Pakistan’s financial sector with global trends and attract international investment.
The upcoming Islamic Capital Market conference will serve as an important platform for global collaboration, with participants from Bahrain, Saudi Arabia, Malaysia, Turkey, Nigeria, and the United Kingdom. The event underscores Pakistan’s dedication to advancing the Islamic finance sector and positioning itself as a leader in the global market.