Pakistan, Malaysia eye stronger Islamic finance ties as PSX hosts Shariah experts

In a bid to enhance collaboration across Shariah-compliant capital markets, a team from Malaysia visited the Pakistan Stock Exchange (PSX). According to credible reports, the team comprises a number of Shariah scholars and industry professionals. 

Dr Shamshad Akhtar, Chairman of the PSX, outlined the importance of joint efforts in Islamic Finance between Pakistan and Malaysia. Reports suggest that the general public is calling for a transition to ‘Islamic’/Shariah-compliant investment opportunities, which can provide investors with Shariah-compliant income streams.    

Currently, approximately half of all publicly listed companies in Pakistan are Shariah-compliant. For clarification, a company is Shariah-compliant if its debt ratio is below a certain threshold, it avoids excessive uncertainty, and its core business activities are not haram, such as the sale of firearms and pork.

The PSX caters to the needs of its faith-based investors by providing Islamic mutual funds and sukuk (Islamic financial certificates). According to data from reports, well over Rs6.5 trillion worth of Ijarah Sukuk have been issued to date.

Shariah compliance in the capital market is on the rise in Pakistan as a result of regulatory frameworks that favour faith-based investments. However, the same cannot be said for international capital markets. 

During discussions, both parties outlined the possibility of joining hands to promote Islamic finance on an international level. If done correctly, a vast influx of funds could be recorded into both the PSX and domestic Islamic mutual funds, as faith-based investors from around the world may be attracted to invest in Pakistan. 

Reports reveal that the Head of Islamic Finance at the Securities and Exchange Commission of Pakistan (SECP) has engaged in high-level discussions with the Malaysian team, highlighting Pakistan’s achievements in the realm of Islamic finance. 

However, the hosts remained eager to learn from the Malaysian delegation as PSX’s CEO and managing director outlined how the meeting was an opportunity to gain insights from their counterparts. Information sharing could lead to improvements within the PSX structure, especially for services that cater to shariah-compliant stocks. 

The meeting also brushed over shortcomings of the domestic capital market, as reports claim that only 0.14 percent of Pakistanis have capital market investment holdings. Industry experts and regulators could help expand the domestic investor base by removing barriers to entry.

Many believe that officials from the PSX could gain insights from the visiting team and implement changes, which could potentially boost investment figures.