SBP Adopts AAOIFI Shariah Standards to Enhance Islamic Banking Compliance in Pakistan

Govt Proposes Changes to SBP Act

Islamabad: October 31, 2024 – The State Bank of Pakistan (SBP) has officially adopted new Shariah standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), aimed at strengthening the Shariah compliance framework in Pakistan’s Islamic banking sector. According to an SBP circular released on Tuesday, this move will further harmonize Shariah practices across the industry.

The newly adopted standards include:

  • Shariah Standard No. 36: Impact of Contingent Incidents on Commitments
  • Shariah Standard No. 37: Credit Agreement

These standards come in addition to the existing regulations and instructions provided by the SBP and are effective immediately, with some clarifications and amendments.

“This adoption is part of SBP’s ongoing efforts to bolster Shariah compliance and align Pakistan’s Islamic banking framework with globally recognized practices,” the circular stated. Banks and financial institutions are expected to integrate these standards within their operations without delay.

SBP has emphasized that any failure to adhere to these standards could lead to penal actions as per the relevant provisions outlined in the Banking Companies Ordinance, 1962.

The adoption reflects SBP’s commitment to fostering a robust Islamic finance ecosystem in Pakistan, aiming for consistency, transparency, and enhanced regulatory oversight in Islamic banking practices.

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