Govt forms four sub-committees to promote Islamic banking

ISLAMABAD: Finance Minister Senator Ishaq Dar said on Tuesday that the government is taking structured policy actions to promote Islamic Banking in Pakistan.

The finance ministry has issued notifications and agreed on the Terms of Reference (TORs) to form four sub-committees for promotion and facilitation of Islamic banking in the country.

The sub-committee on legal and regulatory framework will be chaired by the Governor State Bank of Pakistan, and has representation of various commercial banks, shariah scholars and the ministries of Law and Finance.

The TORs of the committee include fast track adoption of accounting and auditing for Islamic Financial Institutions (IFIs). The Islamic Financial Services Board will establish standards to encourage conventional banks with large Islamic banking operations to convert into full-fledged Islamic banks or establish Islamic banking subsidiaries, and the conversion of domestic debt into Shariah compliant financing.

The sub-committee on taxation will be chaired by the Chairman Federal Board of Revenue (FBR), and has representation of banks, finance division, shariah scholars and heads of revenue authorities of all provinces.

The committee will advise FBR to provide tax neutrality for Islamic Financial Institutions and review tax related matters of Islamic banking subsidiaries of conventional banks and make it a competitive business model.

The sub-committee on capital market will be chaired by the chairman Securities and Exchange Commission of Pakistan. It has representation of FPCCI, banks, shariah scholar, Pakistan Stock Exchange and the finance division.

The committee will coordinate terms and conditions of Shariah compliant instruments issued by NBFC, notified entities and modarabas, issuance of retail sukuk, introduce innovative financial products like Real Estate Investment Trust, and securitisation on Islamic basis. The SBP and SECP will develop framework for Islamic banking institutions to enter into private equity business.

The sub-committee on awareness, training and capacity building will be chaired by the Deputy Governor SBP who is also the convener of all the sub-committees. It has representation of National Institute of Banking and Finance (NIBAF), SECP, banks, finance division and private universities such as IBA, LUMS and IMS.

This committee will promote culture of Islamic finance research and development, set up multi-stakeholders’ forum called Islamic Finance Association, introduce educational reforms regarding Islamic finance and training and capacity building of designated focal persons in government departments.