Growing at a fast rate, Shariah-compliant assets now represent 34.6 per cent of the total assets of the Non-Banking Financial Institute (NBFI) industry. According to annual report issued by Securities and Exchange Commission of Pakistan (SECP), the number of Shariah-compliant mutual funds has reached 109 and Shariah-complaint funds have 41 per cent of the assets under management of the mutual fund industry. The report added that the Takaful industry comprises of five dedicated Takaful operators and 21 window Takaful operators. Takaful sector assets represent 2.7 per cent of the total assets of the insurance industry.
The gross premium of Takaful sector represents 6.9 per cent of the total premium of the insurance industry. During the year, the SECP took a number of initiatives for regulation and development of Islamic finance across the sectors it regulates. In addition due to the SECP's efforts and the FBR's support, tax neutrality for Sukuk vis-a-vis conventional asset-backed securitization (ABS) was achieved by amending the Income Tax Ordinance on August 31, 2016.
On the SECP's recommendation, a two percentage points tax rebate for Shariah-compliant listed manufacturing companies was introduced through the Finance Act, 2016. A new concept of a Shariah-compliant company was introduced through the newly promulgated Companies Act, 2017. This concept extends the previous paradigm where Islamic finance was largely confined to Islamic financial institutions, Sukuk and Shariah screening of listed companies.
The new concept provides an opportunity for any company to become Shariah-compliant. The report further added that Shariah Governance Regulations for the sectors regulated by the SECP are being drafted under the enabling provision in the Companies Act, 2017.
In this regard, eight consultation sessions with relevant organizations and stakeholders have been held, including SBP, PSX, Modaraba and NBFI Association, Shariah scholars, MUFAP and Takaful operators. To facilitate issuance of Sukuk, relevant regulations were amended both for public offering and for private placement.
These amendments were based on the recommendations received from, the subcommittee on Islamic capital markets, extensive consultations held with stakeholders (issuers and arrangers) and local and international experts. The primary objective of the amendments is to reduce cost and hassle for the issuers.
In its meeting, the SECP's Shariah Advisory Board reviewed and discussed different issues, including concept papers on Islamic redeemable capital instrument and Islamic shares financing product. The Board also gave its recommendations for the development of the fit and proper criteria for Shariah ad-visors, amendments to Issue of Sukuk Regulations, 2015, and draft Shariah Governance Regulations.
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