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In 2016, the Securities and Exchange Commission of Pakistan (SECP)
launched All Shares Islamic Index in collaboration with Pakistan Stock Exchange
to measure the performance of Shar¯ı‘ah compliant companies. This index is made
up of over 250 companies. The stocks and shares that meet the Shar¯ı‘ah Screening
criteria are included in the All Shares Islamic Index. As part of the selection process,
each company’s financial report is reviewed and their Shar¯ı‘ah compliance status
checked against technical filters and Shar¯ı‘ah screening criteria prescribed by the
Securities and Exchange Commission Pakistan. The criterion for All Shares Islamic
Index is developed by SECP to examine whether a particular stock conforms with
Shar¯ı‘ah or not. This article aims to analyze the screening criteria for companies
developed by the SECP. According to All Shares Islamic Index, a company that
borrows with interest up to 37% is considered as a Shar¯ı‘ah-compliant company.
Similarly, a company that invests on interest up to 33% is also considerd as Shar¯ı‘ah
compliant. The author argues that the criterion for lending and borrowing by the
companies does not conform to Shar¯ı‘ah since Shar¯ı‘ah does not allow dealing
in rib¯a, no matter the quantity of rib¯a is big or small. It has been observed that
a comprehensive legal, regulatory, and operational framework does not exist for
Shar¯ı‘ah-compliant dealing in shares/securities in the stock exchange. Although the
SECP has attempted to provide a benchmark and a criterion for Shar¯ı‘ah-compliant
trading, but that criterion itself suffers from flaws and involves Shar¯ı‘ah issues. In
order to develop an Islamic capital market, it is imperative to amend the current
legal and operational framework and the screening criterion needs to be revisited to
make it a genuinely Shar¯ı‘ah-compliant screening criterion.
Anees Tahir . (2019) Securities and Exchange Commission of Pakistan’s regulations for Shar¯ı‘ah Screening of Stocks and Shares: Shar¯ı‘ah based Evaluation, Journal of Islamic Business and Management, Vol ume 9, Issue 2.
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