Qudsia Bano

 In a bid to bolster economic growth and financial inclusivity, experts are urging the Pakistani government to delve deeper into the potential of Takaful and Islamic financial systems. The push comes as the country seeks innovative ways to diversify its financial landscape and tap into the substantial benefits offered by Sharia-compliant financial instruments. Takaful, an Islamic insurance concept grounded in principles of cooperation and shared responsibility, has gained traction globally as an ethical and inclusive alternative to conventional insurance. With Pakistan being an Islamic republic, there is a natural synergy between the principles of Takaful and the socio-economic fabric of the nation. Islamic finance, which operates on principles of interest-free transactions and ethical investment, has already established a significant presence in Pakistan. The country is home to several Islamic banks and financial institutions, showcasing the demand for Sharia-compliant financial services. Security and Exchange Commission of Pakistan's Commissioner Insurance Aamir Khan highlights Pakistan's significant financial shift towards Shariah compliance, anticipating a boost in Takaful.

Speaking at a conference recently, he pointed to the Federal Shariah Court's decision on Islamic banking, which indicated this trend. He said the thriving Takaful segment, with Rs62 billion in revenue and 11% year-on-year growth, was a key focus. He outlined SECP's five-year plan to elevate insurance penetration and raise Takaful's contribution to 30%. One of the key advantages of Takaful lies in its ability to foster financial inclusion. By adhering to ethical principles, Takaful ensures that financial services are accessible to a broader segment of the population, including those who may be sceptical of or excluded from conventional financial systems. This inclusivity aligns with Pakistan's vision of fostering economic prosperity and reducing disparities. Talking to WealthPK, Dr Syed M Abdul Rehman, a Shariah adviser, argued that by promoting Takaful and Islamic finance, Pakistan could attract a larger pool of investors, both domestically and internationally. "Islamic finance is increasingly gaining recognition as a viable and resilient financial system, even in the face of global economic uncertainties. Additionally, the introduction and promotion of Takaful can enhance risk management practices within the country.

The cooperative nature of Takaful encourages participants to share risks collectively, mitigating the financial impact on individuals and businesses in the event of unforeseen circumstances," he explained. Rehman said that to realise the full potential of Takaful and Islamic finance, industry stakeholders, regulatory bodies and financial institutions needed to collaborate closely. "Creating a conducive regulatory environment, providing incentives and raising awareness about the benefits of Sharia-compliant financial systems are crucial steps in this direction." He said Pakistan had already taken significant strides in this regard, with the State Bank playing a pivotal role in promoting Islamic finance. "The regulatory framework for Takaful has been established, but there is room for further refinement and promotion," he said. As the global economy evolves, embracing innovative and ethical financial systems becomes imperative. With its rich Islamic heritage and growing economy, Pakistan stands at a crossroads where the exploration and expansion of Takaful and Islamic finance could catalyse sustainable economic development and financial well-being for all citizens. The country's proactive approach in this domain could position it as a leader in the Islamic finance landscape, creating a ripple effect that extends beyond its borders.

Credit: INP-WealthPk