Qudsia Bano

Industry experts commend the Securities and Exchange Commission of Pakistan’s (SECP) recent amendments to the Non-Banking Finance Companies and Notified Entities Regulations, terming them a major stride toward greater transparency and stronger Shariah compliance in Pakistan’s financial sector.

The reforms, set to take effect from July 2025, introduce a cap on management fees to replace the existing Total Expense Ratio (TER) system. They also mandate clearer disclosures for mutual and pension funds, and tighten standards for Shariah-compliant investments to safeguard investor interests. Zafar Iqbal, Investment Officer at Lakson Investments Limited, hailed the amendments as “a long-overdue correction” in the regulatory environment.  “Investors have been demanding more clarity on where their money goes.

These changes make asset managers more accountable, and the improved Shariah framework will boost confidence among the faith-based investors,” he said. He also pointed out that as competition increases among fund managers, the move to cap management fees will benefit small investors who have traditionally borne the brunt of hidden costs.  “Lower operational costs could lead to better net returns for investors,” he noted.

Meanwhile, Dr. Naila Farooq, a senior economist at the Pakistan Institute of Development Economics (PIDE), emphasized the importance of mandatory Shariah compliance certification. “This is not just a regulatory formality; it is essential for maintaining the credibility of Islamic finance products,” she said.  “Introducing the Annual Shariah Advisor’s Report ensures that funds adhere rigorously to Islamic principles throughout the year, not just at inception.”

Dr. Naila added that these reforms align Pakistan’s regulatory framework more closely with global Islamic finance standards, potentially paving the way for greater cross-border investment flows. With the SECP pushing for higher industry standards, stakeholders believe these measures will not only protect investors but also help the financial sector grow in a more sustainable and ethical direction.

Credit: INP-WealthPk