SECP Approves Pakistan’s First Riba-Free Credit Risk-Sharing Product

The Securities and Exchange Commission of Pakistan (SECP) has approved Pakistan’s first Shariah-compliant credit risk sharing product, a move aimed at expanding financing access for underserved sectors, including micro, small and medium enterprises and agriculture.

The product has been developed by National Credit Guarantee Company Limited and is designed to reduce credit risk through a Shariah-compliant risk-sharing mechanism while supporting wider financial inclusion.

According to the SECP, the new structure offers an alternative to conventional credit guarantees by using a pooled fund based on Tabarruʿ (donation) contributions from participating institutions.

Under the arrangement, the pool will be managed by NCGCL as an agent under a Wakalah model, with losses arising from eligible defaults covered from the shared fund, ensuring genuine risk sharing without guaranteed returns.

The SECP’s Shariah Advisory Committee reviewed and approved the framework, while also recommending stronger governance and documentation standards for effective implementation.

Officials said the initiative is expected to boost access to financing for MSMEs, agriculture, and other priority sectors, while supporting Pakistan’s broader transition toward a riba-free Islamic financial system.