The Securities and Exchange Commission of Pakistan (SECP) has issued the Shariah Governance Regulations, 2023, providing a legal framework for Shariah-compliant financial institutions and companies. These regulations, introduced through S.R.O. 1314 (I)/2023, mark a milestone in the SECP’s efforts to eradicate Riba (interest) and Islamize the country’s economy.
Under these groundbreaking regulations, every company aspiring to be recognized as Shariah-compliant must obtain a Shariah compliance certificate from the Commission. This certificate signifies a company’s commitment to adhering to Islamic finance principles and can only be obtained after fulfilling a set of stringent criteria.
The application process for this certification involves submitting the necessary documentation along with a non-refundable processing fee, as specified in Schedule I of the regulations. Companies must also make a solemn commitment to abstain from raising loans on interest, irrespective of the loan amount. Furthermore, they are required to endeavor to settle any existing interest-bearing loans as promptly as possible.
The regulations do allow for the possibility of raising interest-based loans in cases of dire need. However, such actions require explicit approval from either the Shariah supervisory board or the Shariah advisor, as determined by the specific circumstances. The company’s board of directors is also mandated to fully disclose any interest-based loans taken in their annual financial statements and reports.
