The legal and regulatory framework for shariah

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The legal and regulatory framework for Shariah compliance in Pakistan is regarded as among the best ones in the world duly supported by the Constitution of Islamic Republic of Pakistan, judicial system and supporting legislation, regulations and supervision. We have further strengthened it in the Draft Banking Act, which includes specific provisions relating to Islamic banking and addresses the concerns like banker -customer relationship, deposit taking, legal cover to Shariah Board of State Bank and Shariah Advisors of Islamic banks, issues in liquidation, etc. We are further augmenting the regulatory framework by adopting or adapting the international standards issued by above mentioned international organizations in a gradual manner after a careful study in collaboration with the stakeholders. Shariah compliance inspection of Islamic banking institutions recently started by State Bank and the requirements for publishing the report of Shariah Advisor in annual accounts would boost the public confidence. Recently, one of the conventional banks has been granted permission by the State Bank to convert their Islamic banking branches into an Islamic banking subsidiary. We would encourage the other players having Islamic banking branches to convert themselves into Islamic banking subsidiary, whether individually or jointly. Capacity building and awareness The envisaged phenomenal growth in Islamic finance will further amplify the human resource needs. Developing human resource would be a greater challenge as Islamic banks need professionals that not only understand Islamic finance but also have appropriate skill set for banking operations. The Human resource need would particularly be more pressing in areas like product development, risk management, Shari’ah compliance and audit. The growing demand for Islamic banking professionals necessitates a corresponding growth in Islamic finance training. As a part of our Strategy for Islamic Banking, we plan to establish an Islamic finance training institute in collaboration with the Islamic banking industry in near future. Islamic banking industry also needs to follow the good example set by Takaful operators in developing a generic campaign for Islamic banking and finance for greater awareness among public.
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July-September 2009 4 Coordination with Stakeholders Coordination is also required among various government authorities to ensure a level playing field for Islamic Financial Institutions. Some countries, like Malaysia, UK, Singapore and most recently France; have used tax neutrality and exemptions to help kick start IBs besides providing a level playing field for competing with the well established conventional banking. In Pakistan, amendments in tax laws have been introduced to facilitate Islamic banking transactions and we are coordinating with Securities and Exchange Commission of Pakistan for development of Non bank Islamic financial institutions. SBP plans to further streamline the cross border coordination with international
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The legal and regulatory framework for Shariah compliance...

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