The Securities and Exchange Commission of Pakistan (SECP) has approved a comprehensive Strategic Action Plan for 2024-2026 aimed at accelerating the development and growth of Islamic finance within the non-bank financial sector. This strategic move is designed to align with Pakistan’s constitutional mandates and lays a robust framework for the expansion of Islamic finance, ensuring that it progresses in tandem with the country’s broader financial and regulatory goals.
This initiative was created by the SECP’s apex committee, which was chaired by Mr. Mujtaba Ahmed Lodhi, Commissioner-Securities & Capital Markets Division (SCD), and includes representatives from key financial institutions such as the Pakistan Stock Exchange (PSX), Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), and other industry experts. The collaboration reflects the shared commitment of these entities to foster the growth of Islamic finance in the country.
A key feature of this Strategic Action Plan is its alignment with the 26th Constitutional Amendment, which mandates the elimination of Riba (interest) by January 1, 2028. This mandate provides a clear deadline for the transition to Islamic financial systems, making the SECP’s role in facilitating this shift essential. The plan aims to enable Islamic finance across all regulated sectors under the SECP’s jurisdiction by December 2026.
Once the plan is in effect, the SECP will create a strategy to help transition conventional financial institutions to Islamic counterparts, ensuring that the move to interest-free models happens smoothly and with minimal disruption to the financial ecosystem.
The plan is focused on several key objectives. It aims to increase the market share of Islamic finance in regulated sectors, ensuring that Islamic finance becomes a more integrated part of the financial landscape. The SECP also aims to promote standardization within the industry, ensuring that Islamic financial practices are consistent and compliant with Islamic law. Enhancing the overall quality and efficiency of Islamic financial institutions is another priority, ensuring they can compete effectively in the broader financial market. Additionally, the SECP will work on strengthening the legal and regulatory framework, providing a secure foundation for Islamic finance to grow sustainably.
To ensure the plan’s effectiveness, the SECP has conducted extensive consultations with Capital Market Infrastructure Institutions (CMIIs) and other stakeholders. The insights gathered will help shape a conducive regulatory environment that supports the growth of Islamic finance in Pakistan.
The SECP has reaffirmed its commitment to fostering a supportive regulatory environment that aligns with the country’s constitutional and legal requirements. This initiative not only seeks to promote the growth of Islamic finance but also positions Pakistan as an important player in the global shift towards interest-free financial systems. By implementing this Strategic Action Plan, the SECP aims to meet the increasing demand for Islamic financial products and services, contributing to greater financial inclusion and stability in the country’s economy.