ISLAMABAD: The proposed “Shariah supervisory board” of the Islamic financial institutions would ensure that the financial resources are free from ‘Riba’ (interest) and other elements prohibited by Shariah.
The new Shariah Governance Regulations, 2023 issued by the Securities and Exchange Commission of Pakistan (SECP) revealed that “Shariah supervisory board” means a board constituted, appointed or engaged by the Islamic financial institution to advice it on matters concerning Shariah principles and rules.
It would have the mandate to review and monitor to ensure that inflows and outflows of financial resources are free from Riba (interest, usury or any other form), Qimar (Gambling), Gharar (Speculation) and other elements prohibited by Shariah (e.g. drugs and alcohol, tobacco, pork related items, etc.), SECP stated.
It is expected that proposed regulations will further help in achieving the constitutional objective of eradication of Riba and Islamization of the economy.
Every Shariah-compliant company and Islamic financial institution shall form, constitute, appoint, or engage a Shariah supervisory board within such period as may be notified by the Commission, comprising at least two persons meeting fit and proper criteria and other requirements as provided in these regulations.
Provided that until a Shariah supervisory board is formed, appointed, or engaged by a Shariah-compliant company or an Islamic financial institution, it must appoint or engage a Shariah advisor registered under these regulations to perform the functions of the Shariah supervisory board.
The term of appointment or engagement of the Shariah supervisory board or Shariah advisor shall be for a period of three years that may be extended further with mutual consent.
However, such a term may be capped for the duration of the applicable Shariah-compliant security if it is a redeemable capital instrument.
In the case of short-term securities for a period less than a year, the issuer may not retain the Shariah supervisory board or Shariah advisor for that particular security after its issuance, SECP regulations added.
Copyright Business Recorder, 2023