KARACHI (January 17 2010) – The State Bank of Pakistan (SBP) has decided to gradually adopt Shariah standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) keeping in view the local environment and needs of the Islamic banking industry in the country.
The decision to adopt AAOIFI Shariah standards has been taken to harmonise and standardise the Shariah practices and procedures of Islamic banking institutions (IBIs) in the country as per internationally recognised standards, says State Bank's IBD Circular No 1.
The Circular said that in the first phase, AAOIFI's Shariah standards No 3 (Default in Payment by a Debtor), No 8 (Murabaha to the Purchase Order), No 9 (Ijarah & Ijarah Muntahia Bittamleek) and No 13 (Mudaraba) have been reviewed and adopted for IBIs in Pakistan.
The adoption of these standards will, however, be subject to certain clarifications and amendments, details of which are given in the Appendix-A of the Circular. IBIs have also been advised to be prepared for adoption of other AAOIFI's Shariah standards in next phases, it added.
It may be noted that adoption of the AAOIFI Shariah standards for IBIs is in addition to current Prudential Regulations, guidelines and other circulars and directives issued by different SBP departments from time to time and are not replacing them by any means.
Further, in case of any conflict with the Shariah standards adopted vide IBD Circular No 1; Para F 'Essentials of Islamic Modes of Financing', Annexure-I – Instructions for Shariah Compliance of IBD Circular No 2 dated March 25, 2008 shall prevail. To provide ample time and a level of comfort to IBIs for preparation, it has been decided that these standards will be implemented from July 1, 2010. However, failure to comply with these instructions may invoke penal action under the provisions of Banking Companies Ordinance, 1962, the Circular added.