The federal government has constituted a Shariah Board to develop an "Islamic capital market" to effectively mobilise Islamic finances. Also, the government plans to carry out extensive research to introduce global mainstream Islamic products to the country's capital market. Finance Minister Ishaq Dar will arrive today (Wednesday) at Karachi Stock Exchange (KSE) to launch the All Shares Islamic Index of Pakistan (ASIIP) jointly developed by KSE and Meezan Bank Limited (MBL).
The new Shariah index is being developed under the government's initiative to carry out major capital market reforms. ASIIP, according to a stakeholder, would be an extension of the existing KMI-30 index recommended by a five-member subcommittee formed by the Finance Minister-backed Steering Committee on capital market reforms. Chaired by MBL's Shariah advisor Imran Usmani, the subcommittee comprised representatives from Securities and Exchange Commission of Pakistan (SECP), State Bank of Pakistan (SBP), Mutual Funds Association, KSE and MBL.
"We screened some 431 listed firms of which 225 were found Shariah-compliant thus qualified for inclusion in the index," said Ahmed Ali Siddiqui, head of product development and Shariah compliance at Meezan Bank. The name of ASIIP, the banker said, might be changed into KMI All Shares Index or All Pakistan Meezan Index after the opening of Pakistan Stock Exchange (PSE) on January 1 next year.
"This would not only deepen the presently narrow investor base but also provide the Islamic mutual funds with a whole universe of Shariah-compliant companies," said Ahmed. An official document available with Business Recorder terms the new index as a "Shariah-compliant investment alternative". "World over, Shariah-compliant products and services are growing at a faster rate than conventional financial and capital market products and services," said the document.
Illustrating this, Ahmed said during last three years KMI-30 index had constantly been outperforming the KSE-300 index. "Specially, last two years saw KMI index outperforming the KSE index significantly. Returns for KMI remained 20 percent against KSE's 10 percent," the MBL official said. The PML-N government in Islamabad, known for its right leanings, appears to be gradually, what analysts call it, Islamizing the country's economy through promoting Islamic banking and now developing an "Islamic capital market".
"A Shariah Board comprising Islamic scholars and market professionals has been set up," reads the official document. The government, through front regulators at SECP, also plans to consolidate the existing institutions and develop innovative Shariah-compliant institutions, products and services to deepen the capital market and attract both national and international pool of resources.
"Efforts will be focused on creating a viable market for the effective mobilisation of Islamic funds," it said adding research work was under way for introducing the global mainstream Islamic products in local bourses. "So that investors can enjoy benefits of Shariah-compliant investment alternatives," the document said. Besides, the government is also contemplating to set up an Islamic products electronic platform at the country's now-integrated stock exchanges.
The new index, Ahmed said, envisages a risk-free trading by the investors in the 225 listed Shariah-compliant companies which would have no element of leverage. "There would be no speculative investment," the banker added saying Usmani of MBL would be heading an index monitoring committee to keep an eye on the working of ASIIP.
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