ISLAMIC FINANCE IN PAKISTAN NEEDS WELL-DESERVED PROMOTION.

Byline: SYED FAZL-E-HAIDER

Islamic finance can find rich social grounds for its growth and expansion in Pakistan and as this sector dominate Shariah-compliant services needed to be diversified. Noncompliance of Islamic law can result in withdrawal of funds from an Islamic bank. Hence, Shariah compliance is a serious matter for an Islamic bank. The concept of Islamic finance needs to be introduced for the promotion of Islamic banking and insurance industry in the country.

As a regulatory authority of the insurance sector, the Securities and Exchange Commission of Pakistan (SECP) should take more initiatives to tap the country's enormous potential in the sector by providing level playing fields to government and private sector. The decision of establishing a Shariah advisory board by the SECP was a step forward in this regard. Shariah advisory board will guide Islamic Financial Institutions (IFIs) and Islamic Capital Markets in their transactions.

It was decided that the board would comprise of nine members including prominent Islamic scholars, jurist, and accountant. The SECP board would undertake educational activities for understanding Shariah principles and introduction and implementation of new models and products based on global research. There is, however, dire need for taking more initiatives for growth and expansion of Islamic finance in the country.

Islamic banking is one of the emerging fields in global financial market. It is growing at very fast pace all around the world. Islamic investment banks and Islamic venture capital funds are yet to be launched in Pakistan. Islamic banking does suit to religious mindset in the Muslim country where the people generally abstain from purchasing insurance policies on religious grounds. Similarly, the people have reservations on banking which also involves payment of interest. The people believe that Islam forbids insurance due to involvement of fixed rate of interest and hence, they are more inclined to buying Shariah-compliant products.

Islamic banking is a system of banking that is consistent with Islamic law and guided by Islamic economics as Islam prohibits usury, the collection and payment of interest. Pakistan is not at par with the Muslim world in growth and development of Islamic finance, yet it has shown an impressive growth and diversification in Islamic finance over the past three decades. There are 29 Islamic open-ended funds 18 voluntary pension funds and one closed-ended fund in...