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Process for Standardization of Shariah Practices

In order to bring our industry at par with the

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In order to bring our industry at par with the international standards and also achieve standardization of Shariah practices locally, a mechanism for adoption/adaptation of these Shariah standards has been developed by SBP. According to this mechanism the meetings of Shariah Advisors of all IBIs are being held with a view to thoroughly study the AAOIFI Shariah Standards one by one, for their possible adoption / adaptation in our market. 2. Draft Instructions & Guidelines for Shariah Compliance : Draft Instructions for Shariah Compliance cover regulations in areas related to appointment, duties/ responsibilities and report of Shariah Advisor; conflict resolution in Shariah rulings; permissible modes of financing and investment; essentials of Islamic modes of financing; use of charity fund; introduction of new products & services and schedule of service charges. Draft Guidelines for Shariah Compliance cover areas like Internal Shariah compliance, Internal Shariah Audit; investment in shares; policy for profit distribution with PLS account holders and financial reporting & general disclosure requirements. Finalization of these instructions & guidelines will further contribute towards the process of standardizing practices in the respective areas. 3. IFSB Risk Management Guidelines Islamic Financial Services Board (IFSB) promotes the development of a prudent and transparent Islamic financial services industry through introducing new or adapting existing international standards consistent with Islamic Shariah principles. IFSB has issued standards/guidelines regarding Capital Adequacy, Risk Management and Corporate Governance for institutions offering Islamic financial services (other then Takaful). SBP is planning to adopt these standards keeping in view the local environment and in consultation with various internal and external stakeholders of Islamic banking. Currently SBP is working on the guidelines for Risk management of Islamic banking institutions by tailoring them to the needs of local market. The aim of these guidelines is to further complement and enhance the current Risk Management regime of SBP by identifying and suggesting techniques to manage various types of risks unique to Islamic banking institutions. This exercise will further contribute towards the desired process of standardization in the industry.
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