- Says it will result in enabling tax, regulatory, and policy environment
State Bank of Pakistan (SBP) Governor Jameel Ahmad on Monday emphasised that Pakistan needed coordinated and sustained efforts on multiple fronts for building a robust Islamic corporate debt market.
Speaking at the inaugural International Conference on Islamic Capital Markets (ICM) jointly organised by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Securities and Exchange Commission of Pakistan (SECP), he was of the view that these steps would provide an enabling tax, regulatory and policy environment.
Noting the importance of retail investors, he stressed the need for education programmes aimed at complementing the efforts for strengthening the market infrastructure.
According to a statement issued by the central bank, Ahmad also emphasised the need to embrace Islamic fintech, digital finance, climate finance, and innovation with a futuristic view to achieving holistic and sustainable development of an inclusive Islamic capital market.
He was of the view that collaboration among regulators, financial institutions, industry players and Shariah scholars was essential for bringing standardisation of Islamic financial contracts and simplifying the processes.
During the event, Ahmad spoke at length on key issues and challenges in the development of the Islamic capital market. He was convinced that the solutions are well within reach and hoped that the insights and knowledge exchanges during this conference will help in developing a roadmap for a sustainable, diversified, and inclusive Islamic capital market in Pakistan.
The governor noted that Islamic finance as a global industry had crossed the $3 trillion mark and the Islamic capital markets account for around 31% 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.
“Islamic banking has grown into a systemically important sector in the country both in terms of assets base and current market share,” he said.
Highlighting the challenges pertaining to the development of Islamic capital markets, particularly of the Islamic debt market, the governor stated that the conversion of public debt into Shariah-compliant instruments remains the biggest challenge.
“The lack of adequate sovereign assets has remained a major impediment to regular issuance of asset-based Sukuk until recently,” he said. “SBP has constituted a high-level working group to develop practical solutions on alternate Shariah compliant structures, especially Asset Light Sukuk Structures.”
He envisioned that Pakistan’s Islamic Capital market will be fair, modern, efficient, globally competitive, responsive to the needs of its stakeholders, and driven by sound regulatory principles, which should provide the impetus for sustainable economic growth.