Islamic capital markets must for macroeconomic stability: FM Aurangzeb

Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb said Islamic finance and Islamic capital markets could play key role in helping Pakistan remain steadfast on the road to macroeconomic stability and sustainable growth, reported 24NewsHD TV channel. 

Addressing virtually the inaugural session of the Second International Islamic Capital Markets Conference & Expo in Karachi on Thursday, the minister said, Pakistan faced significant economic challenges in recent years, however, those issues were now being effectively addressed, and the country was on the right trajectory towards microeconomic stability and sustainable growth.

He said Islamic capital markets could play a pivotal role in this road to market as instruments such as sukuk, equity funds, and Shariah-compliant investment vehicles not only attracted investment but also reduced reliance on interest-based borrowing. 

Shaikh Ebrahim Bin Khalifa Al-Khalifa, Chairman, AAOIFI Board of Trustees, Dr. Sami Al-Suwailem, Acting Director General, Islamic Development Bank Institute, Akif Saeed, Chairman SECP, Saleemullah, Deputy Governor SBP, and other senior delegates attended the session.

The minister described the conference as reflective of Pakistan’s growing commitment to fostering a robust Islamic capital market, highlighting the country’s dedication to transforming its financial ecosystem in line with Shariah principles.

He said the government was firm in its commitment to transforming the financial system in line with Shariah principles, adding that as of June 30, 2024, 56% of market capitalization at the Pakistan Stock Exchange comprises Shariah-compliant securities. “In the collective investment segment, 48% of assets under management of mutual funds, 66% of assets under management of voluntary pension funds, and 95% of assets under management of REITs are already Shariah-compliant. These statistics deflect the progress that we have made over year.”

He said that Islamic finance and instruments such as sukuk, equity funds, and Shariah-compliant investment vehicles were vital tools for mobilizing resources for critical sectors, including infrastructure development and poverty alleviation through Islamic social finance, while maintaining adherence to ethical and transparent principles.

He noted that a growing interest in Shariah-compliant investment products was a testament to the increasing global demand for ethical and sustainable financial solutions.

“The steady and healthy growth of Islamic finance, both in Pakistan and internationally, reflects the shifting preferences of investors towards value-based financial systems,” he said, adding this demand had spurred interest from market participants across sectors, both within and outside of banking, which is contributing to the creation of a comprehensive Islamic finance ecosystem.

The Finance Minister further noted that full realization of the potential of Islamic finance was not possible without collective and collaborative efforts of scholars, financial institutions, regulatory bodies, and industry practitioners to address existing challenges, develop innovative Shariah-compliant financial products, and build public trust. 

“We must ensure that Islamic finance is not only rooted in Shariah principles but also practical, transparent, and capable of meeting the evolving needs of our people,” he added.