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The federal government is committed to promoting Islamic banking and the State Bank of Pakistan (SBP) has been putting in efforts to "Islamize the financial system of Pakistan," Federal Minister for Economic Affairs, Hammad Azhar informed the Senate on Friday.

In his written reply to a related question posed by Senator Siraj-ul-Haq from Jamaat-e-Islami (JI), the minister said the (then) federal government, in pursuance of Section 8 of the Enforcement of Shariah Act, 1991 appointed a commission under the chairmanship of the then governor SBP to recommend measures for establishing Islamic economic system in the country.

The commission accordingly presented its recommendations for Islamization of the banking system, he said, adding that the commission report recommended Musharakah and Modaraba to be the basic forms of Islamic financing to be used in the domestic financial sector and that steps should be taken to remove obstacles in the application of theses modes.

"Several steps have been taken for implementation of Musharakah and Modaraba modes of financing to be adopted in the industry. A comprehensive legal framework has been established for Modaraba financing by Securities and Exchange Commission of Pakistan and several laws supporting Musharakah have also been enacted," he told the Senate session during the question hour.

On Islamic banking, he said, the SBP, being regulator of the banking sector, has been "playing a pivotal role not only for strengthening the regulatory and Shariah compliance framework for Islamic banking industry but has also been promoting Islamic banking among masses including academia, business community, financial industry and general public."

Some of the key initiatives taken by SBP for the promotion of Islamic banking industry include introducing licensing requirements on Shariah compliance, rationalisation of Minimum Capital Requirements (MCR) for Islamic Banking subsidiaries, Shariah supervisory and compliance framework, liquidity management solution for Islamic banking industry as well as other measures, the minister said.

The Section 8 (1) of the Enforcement of Shariah Act, 1991 reads, "Islamization of economy (l): The State shall take steps to ensure that the economic system of Pakistan is constructed on the basis of Islamic economic objectives, principles, and priorities."

Meanwhile, the reports of the Senate Standing Committee on Interior on the National Counter Terrorism Authority (Amendment) Bill, 2019 and of Senate Standing Committee on Law and Justice on the Constitution (Amendment) Bill, 2019 were laid in the Senate.

The House further discussed the annual report of the National Commission on the Status of Women for the year 2017.

The senators including Waleed Iqbal, Nuzhat Sadiq, Seeme Ezdi, Mushtaq Ahmad, Mohsin Aziz, Sherry Rehman, Sabir Shah and Gianchand participated in the discussion. The Senate would meet again on Monday at 3pm.

Copyright Business Recorder, 2020

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