ISLAMABAD, May 8: The Securities and Exchange Commission of Pakistan (SECP) has decided to establish a shariah advisory board to cater to the growing market demand for this segment.

The board would be the central advisory body to the SECP and would have the mandate to guide Islamic Financial Institutions (IFIs) and Islamic Capital Markets in their transactions to make them in accordance with the principles of Shariah.

“It will allow markets players, including operators at the capital markets and financial institutions to innovate and launch products within the purview of Shariah principles,” said an official of the SECP.

It is to ensure that the business dealings marketed in the name of Shariah are in line with Islamic principles. The nine members of board of the SECP will include prominent Ulema, a jurist, an accountant and representatives of the commission.

Each member of the board shall be a qualified individual, having indepth knowledge and experience of Islamic accounting, finance, economics and Shariah laws.

The board shall be responsible for ascertainment of Islamic laws for development and promotion of Islamic Financial Institutions (IFI) which include Islamic Mutual Funds, Islamic Pension Funds, Takaful Operators and other financial institutions which are based on Shariah principles that are supervised and regulated by the SECP.

Some of the key functions to be performed by the board are to validate products of IFIs and to ensure their compatibility with Shariah principles.

To recommend guidelines on the criteria for investment by Islamic capital institutions and advise on reporting and auditing standards.

The board would also be responsible for undertaking educational activities for understanding Shariah principles and introduction and implementation of new models and products based on international research. It is expected that the board shall play a crucial role in bringing an effective and efficient Shariah governance system,” the official added.