Historical periods in development of Islamic Finance in Pakistan and role of Center for Advisory Services in Islamic Banking and Finance (CAIF) in its onward development

Posted on November 10, 2021
Muhammad Arif : Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research ArifHabib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan

In 1970s some efforts started with no conspicuous results in Pakistan,

Than in 1980s bold and comprehensive initiatives were undertaken. Pakistan was ranked amongst the three countries of the world for commencing non-interest based banking. Various legislations (Companies Ordinance, 1984, Negotiable Instruments Act, 1882, State Bank Act and Recovery of Loans Laws etc. were reviewed to bring these in line with the tenants of Islam. A new interest free Instrument namely; PTC (Participation Term Certificate) for Corporate Financing was introduced and was later replaced with TFC (Term Finance Certificate). Non-Interest Based Instruments (NIB) was announced. In the Conventional Banks separate interest free counters were opened on January 01, 1981. For meeting working capital needs of trade and industry, Musharaka was introduced on July 01, 1982. Profit and loss sharing basis was introduced in Conventional Banks on April 01, 1985.

In November 1991, Federal Shariat Court was established. An announcement was made on December 23, 1991 that transactions involving interest in banks would cease to have effect finally by June 30, 2001.

During 21st Century Commission for Transformation of Financial System was constituted in State Bank of Pakistan. Task Force was set up in SBP to suggest ways and means to eliminate interest from Government financial transactions. However, parallel banking system namely; Conventional and Islamic Banking has continued till today

Now to proceed for development of Islamic Banking and Finance, The world Financial and Banking Crises of 2007-10 played its role that has initiated a growing interest in the Islamic Financial system by the Financial and Banking experts.  Islamic Financial system with its focus on poverty elevation and market stabilization is attracting many financial experts and researchers.

Meanwhile we in Pakistan established Center for Advisory Services in Islamic Banking and Finance (CAIF) with the sole purpose of providing a platform for undertaking research and disseminating knowledge and education to the Financial and Banking Market for adopting Islamic Financial system in parallel with the existing financial system and ultimately replacing it with the Islamic Financial and Banking System.

The platform was established to bring clarity on the perception of Islamic Banking and Finance to the general public. Other functions levied for CAIF was to work with the Banking sector and other financial institutions in the country and abroad for development of Islamic Banking market in the field of Takaful and Microfinance,

And to work on various Islamic Banking models available in the world., To carry out study of various Islamic products available in the existing market with the aim of refining and improving their financial returns, To initiate and encourage research activities in educational institutions, To hold workshops, seminars, courses and debates on the subject, To study political implication in the implementation of Islamic Financial System and remove misconceptions, To help government understand and make informed choices about issues of domestic and international concern to Play a mediating role between the government and the public that helps builds trust and confidence in Islamic Banking and Finance, to Provide a constructive forum for the exchange of ideas and information between key stakeholders in the policy formulation process and to Create networks and exchanges via workshops, seminars, and briefings and disseminate their findings to the general public and the industry.

The executive committee of CAIF is composed of Muhammad Arif as its chairman with ManzarNaqvi Editor of the financial daily, Retired Air Commodore Tahir Bhutta and Mubeasher Mir Editor of Daily Pakistan.

We all pledge to continue our work with full zeal.

365 thoughts on “Historical periods in development of Islamic Finance in Pakistan and role of Center for Advisory Services in Islamic Banking and Finance (CAIF) in its onward development”

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