Pakistan’s economy will be interest-free by 2027, said Governor State Bank of Pakistan (SBP) Jameel Ahmed at the inaugural Islamic Capital Markets (ICM) conference on Monday.
“Islamic banking in Pakistan has grown by 24 percent in the last ten years. We are committed to transforming the financial sector into a Shariah-compliant system. To this end, SBP and SECP, as part of the federal government’s steering committee, are playing their roles in achieving the aligned goals for the transformation towards an Islamic economic system,” he stated.
Apart from the central bank chief, the conference comprised other big-name guests including Chairman Securities and Exchange Commission of Pakistan (SECP) Akif Saeed, Federal Minister for Finance and Revenue Ishaq Dar, amongst others.
The Governor noted that Islamic finance as a global industry has crossed the USD 3 trillion mark and the Islamic capital markets account for around 31 percent share of this growing pie. He, however, noted that Islamic capital markets are in the nascent stages of development in most jurisdictions. He attributed this to gaps in institutional, legal, and regulatory frameworks, inefficient price discovery, and lack of diversity in instruments and investors. The Governor showed satisfaction that Islamic banking has grown into a systemically important sector in the country both in terms of assets base and current market share.
The development and deepening of Islamic capital markets are imperative to support economic growth, mobilize savings, improve resource allocation, and provide diverse funding resources to economic agents, Jameel said.
The SBP Governor said that the main impediments to the growth of Islamic capital markets include gaps in institutional, legal, and regulatory frameworks; a lack of efficient ways for price formation and discovery; and a lack of diversity in Islamic capital markets instruments and investors.
Chairman SECP, Akif Saeed said, “The aim is to promote the Islamic capital market in the next two years”, SECP Chairman Akif Saeed said in his address at the first Islamic Capital Markets Conference, adding that “Several companies and financial institutions are approaching to launch Islamic services and products”.
Issuance of Sukuk can accelerate the development of the Islamic financial system. Akif Saeed concurred with the SBP Governor and said that after the decision of the Federal Shariah Court, important steps have been taken to promote the Islamic financial system in the country.
SECP has established a special window for the promotion of Islamic finance products; however, government support is still needed for the development of the Islamic capital market, he said, adding that this conference will help in the promotion of Islamic finance.
Finance Minister Ishaq Dar informed the conference that Pakistan has a strategic plan in place to grow Islamic finance. “In addition, we have created a national financial inclusion strategy that covers many of the components needed to create Islamic financing,” he added.
He also announced that National Savings is planning to introduce Shariah-compliant solutions for investors. These offerings will meet the general public’s need for Sharia-compliant investments. They will be in the form of 1, 3, and 5-year term accounts with monthly, semi-annually, and end-to-maturity profit distributions. More details on the development will be shared soon, he stated.
On another note, Dar said Pakistan is one of the few countries with a well-developed regulatory framework for microfinance institutions. “I must compliment SBP and SECP for doing a wonderful job in this regard,” he said.
The minister said that major financial markets exhibit solid evidence that Islamic finance has already been mainstreamed, parallel to the global financial system, and that it has the potential to address the challenges of ending extreme poverty and boosting shared prosperity.
Dar said, “According to the Islamic Finance Development Report 2022, there are 1,679 Islamic financial institutions, including 560 Islamic banks operating in 76 countries, with 17 percent YoY growth”. In Pakistan, Islamic financing recorded a growth rate of 29 percent in 2022, he added.
The inaugural ICM conference, co-hosted by the SECP and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), will feature prominent speakers from Bahrain, Turkey, Malaysia, the UAE, and the UK, as well as local industry experts, scholars, and practitioners, to explore the latest developments in the Islamic capital market.
Participants will address critical concerns and possibilities in the Islamic financial industry.