SECP clears first Shariah credit guarantee

The Securities and Exchange Commission of Pakistan (SECP) has approved the country's first Shariah-compliant credit risk-sharing product, enabling Islamic financial institutions to expand financing to underserved sectors such as micro, small and medium enterprises (MSMEs) and agriculture. According to an official statement issued on Saturday, the product was developed by the National Credit Guarantee Company Limited (NCGCL). It reduces credit risk through a risk-sharing mechanism while ensuring compliance with Shariah principles. Under this structure, participating institutions contribute to a pooled fund on a donation (Tabarru) basis, managed by NCGCL as an agent (Wakeel) under a Wakalah arrangement. Losses from eligible defaults are covered from this pool, ensuring genuine risk sharing without guaranteed returns. The SECP's Shariah Advisory Committee reviewed and approved the structure, noting that it aligns with key Shariah principles. The initiative is expected to increase access to financing for MSMEs, agriculture and other priority sectors. Earlier this week, the SECP, in collaboration with the government of Punjab, the Central Depository Company (CDC) and the Insurance Association of Pakistan, marked the go-live of a major digital integration to enforce motor third-party insurance in the province. Under this initiative, the government of Punjab has made it mandatory for all public transport vehicles to obtain third-party motor insurance. All public transport route permits are now linked with this requirement, ensuring compliance before issuance and renewal. Punjab has also digitised its vehicle route permit regime, which is now integrated with CDC's motor insurance repository for real-time verification of insurance policies, enhancing transparency and enforcement. Speaking at the ceremony, SECP Chairman Dr Kabir Sidhu stated that the initiative reflects a shift towards digital enforcement and highlights insurance as a critical tool for financial protection. He noted that while the repository contains data of about one million insured vehicles, this remains low compared with nearly 30 million vehicles on the roads.