An Analytical Review of the Influence of Regulatory and Supervisory Bodies on the Business of the Islamic Financial Institutions (IFIs) in Pakistan

Sahibzada Muhammad Wasim Jan; Hassan Shakeel Shah; Ahmad Azam Bin Othman

doi:10.32350/ibfr.81.01

Sahibzada Muhammad Wasim Jan Ahmad Ibrahim Kulliyyah of Laws, International Islamic University, Malaysia
Hassan Shakeel Shah Sultan Omar Ali Saifuddien Center for Islamic Studies, University of Brunei Darussalam, Brunei
Ahmad Azam Bin Othman Ahmed Ibrahim Kulliyyah of Law, International Islamic University Malyasia, Malyasia

DOI: https://doi.org/10.32350/ibfr.81.01

Keywords: Council of Islamic Ideology (CII), Federal Shariat Court (FSC), Islamic Financial Institutions (IFIs), regulations, State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP)

Abstract

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Islamic financial market in Pakistan comprises Islamic banking, Takaful and Islamic capital market. It is regulated and supervised by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). Despite the regulatory and supervisory mechanism crafted by these authorities, there are other institutions such as the Council of Islamic Ideology (CII), Federal Shariat Court (FSC) and international institutions such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) which intervene and influence the Islamic banking practices. Based on an analytical approach, the current study found an overlapping situation in the authority exercised by these bodies over the business of the IFIs in Pakistan. Hence, a distinctive regulatory authority based on an adequate legal foundation should be created to watch over the business of the IFIs in Pakistan. The supreme authority can be conferred to the Shariah Advisory Committee (SAC) of the SBP or to a separate body in the current judicial infrastructure of the country in order to overview, harmonize and resolve the issues related to the business of the IFIs.

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Author Biography

Ahmad Azam Bin Othman, Ahmed Ibrahim Kulliyyah of Law, International Islamic University Malyasia, Malyasia

Islamic financial market in Pakistan comprises Islamic banking, Takaful and Islamic capital market. It is regulated and supervised by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). Despite the regulatory and supervisory mechanism crafted by these authorities, there are other institutions such as the Council of Islamic Ideology (CII), Federal Shariat Court (FSC) and international institutions such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) which intervene and influence the Islamic banking practices. Based on an analytical approach, the current study found an overlapping situation in the authority exercised by these bodies over the business of the IFIs in Pakistan. Hence, a distinctive regulatory authority based on an adequate legal foundation should be created to watch over the business of the IFIs in Pakistan. The supreme authority can be conferred to the Shariah Advisory Committee (SAC) of the SBP or to a separate body in the current judicial infrastructure of the country in order to overview, harmonize and resolve the issues related to the business of the IFIs.

References

Akhtar, B., Akhter, W., & Shahbaz, M. (2017). Determinants of deposits in conventional and Islamic banking: a case of an emerging economy. International Journal of Emerging Markets, 12(2), 296−309. https://doi.org/10.1108/IJoEM-04-2015-0059 DOI: https://doi.org/10.1108/IJoEM-04-2015-0059

Akhtar, S. (2006). Shariʻah Compliant Corporate Governance. In Keynote address delivered at Annual Corporate Governance Conference, Dubai on November (Vol. 27, p. 2006). http://www.sbp.org.pk/about/speech/ governors/dr.shamshad/2006/Corporate-Governance-30-Dec-06.pdf

Akhtar, S. (2006, November). Syariah compliant corporate governance. In Keynote address by the governor of the State Bank of Pakistan at the annual Corporate Governance Conference, Dubai, United Arab Emirates (pp. 243−83).