SECP proposes new strategy for Islamic finance standards

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has proposed a new strategy to boost the adoption of Islamic finance standards by introducing a more comprehensive and interactive approach, with a phased implementation of all standards to ensure effective compliance.

The SECP said on Saturday it had published a consultation paper to seek comments and feedback from stakeholders on the new strategy for adopting the standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

AAOIFI is a Bahrain-based body that sets standards for the global Islamic finance industry, which is estimated to have assets worth around $2.5 trillion and is growing fast in several Muslim-majority countries.

"By considering the maturity level of industry and practical difficulties in adopting all standards at once, the proposed strategy suggests a staggered approach to implementation," the SECP said in a statement.

Presently, only seven Shariah standards have been adopted, whereas the adoption of 10 more Shariah standards is in process. However, the existing approach, which includes picking standards based on necessity, produces an inadequate framework since many significant and consequential features offered in accounting, auditing, governance, and other Shariah-related standards may be missed out.

Therefore, a new strategy has been envisaged emphasizing comprehensiveness, integration, interaction, feedback, and preparedness for global and domestic Islamic finance growth. All of AAOIFI’s standards shall be adopted as non-binding guidelines, and institutions will be encouraged to voluntary adopt them while conducting Islamic financial transactions.