The State Bank of Pakistan (SBP) has updated the terms and conditions for appointing Shariah scholars in Islamic banks and banking divisions, reflecting the industry’s expansion and the country’s shift towards Islamic banking. According to the revised Shariah Guidance Framework for Islamic Banking Institutions (IBIs), effective January 1, 2028, Shariah board members, including chairpersons and resident members, will be restricted from serving on multiple Islamic banking institutions.
This revision aligns with Pakistan’s goal to transform its conventional banking system into an Islamic one by 2028, emphasizing the crucial role of Shariah scholars in supervising and operating Islamic banks under Islamic guidelines. Currently, Shariah scholars can serve a bank for up to two consecutive three-year terms, with the possibility of a third term subject to SBP approval.
The SBP has instructed Islamic banks to engage experienced Shariah scholars with a strong background in serving on Shariah boards or committees of reputable organizations locally and globally. Each Islamic banking institution must appoint at least three Shariah board members, designating one as chairperson and another as a resident member to ensure effective Shariah compliance.
Under the new framework, Shariah scholars, except resident members, may serve on the boards of up to three Islamic banking institutions in Pakistan. However, each bank must ensure that at least two board members, excluding resident members, are not serving on the board of any other Islamic bank. This requirement aims to enhance the independence and effectiveness of Shariah boards.
Currently, Pakistan has six full-fledged Islamic banks and 16 Islamic banking divisions within conventional banks. Several banks are transitioning from conventional to Islamic operations following a Federal Shariat Court ruling.
The SBP’s revised Shariah Governance Framework (SGF) aims to align with international best practices and strengthen the Shariah compliance environment across all IBIs, including full-fledged Islamic banks, subsidiaries, and divisions of conventional banks. The framework outlines the roles and responsibilities of various IBI components, such as the Board of Directors, Executive Management, Shariah Board, Shariah Compliance Department, Product Development, and Internal and External Audit, in ensuring Shariah compliance.
The SBP previously released versions of this framework in 2015 and 2018, and the latest update reflects ongoing developments in the Islamic banking sector
