ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved its Strategic Action Plan 2024-2026, aimed at advancing Islamic finance across all non-bank financial sectors under its regulatory ambit. The plan, developed in collaboration with key stakeholders, seeks to enable Islamic finance across regulated sectors by December 2026 and pave the way for a full conversion from conventional to Islamic financial institutions.
The initiative aligns with Pakistan’s constitutional mandate to eliminate Riba by January 1, 2028, as stipulated by the 26th Constitutional Amendment. The plan’s comprehensive framework will guide the growth, standardization, and quality enhancement of Islamic finance while fortifying its legal underpinnings.
Four Pillars of Development
The Strategic Action Plan is structured around four key verticals:
- Growth Acceleration: Aimed at increasing the share of Islamic finance in regulated sectors.
- Achieving Standardization: Focused on promoting consistency and harmony across Islamic financial practices.
- Improved Quality: Targeted at enhancing the performance and efficiency of Islamic financial institutions.
- Strengthening the Legal Framework: Designed to provide a robust regulatory foundation for sustainable growth.
This holistic approach is expected to foster the expansion of Islamic financial institutions, assets, and services in the non-bank financial sector.
Collaborative Efforts
The plan was formulated by SECP’s apex committee, chaired by Commissioner Mujtaba Ahmed Lodhi, with representatives from the Pakistan Stock Exchange (PSX), Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), SECP policy department heads, and industry experts. This broad-based collaboration aimed to address the challenges and opportunities in transitioning to a Riba-free financial system.
Extensive consultations with Capital Market Infrastructure Institutions (CMIIs) were also undertaken to ensure the plan’s practicality and relevance. Leveraging the expertise of these institutions, the SECP intends to create a supportive regulatory environment that facilitates seamless adoption of Islamic finance principles.
Next Steps
Following the enablement phase, the SECP plans to introduce a detailed conversion strategy to assist conventional financial institutions in transitioning to Islamic financial systems. The approach will prioritize minimizing disruptions and ensuring a smooth integration process for the financial sector.
The SECP reaffirmed its commitment to fostering the growth of Islamic finance, emphasizing its alignment with constitutional and legal obligations. This initiative marks a significant step toward positioning Pakistan as a global leader in Islamic finance.
