National and Global Islamic Financial Architecture:
Problems and Possible Solutions for the OIC Member Countries
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Financial Statements include: the number and nature of pools maintained by the IBI along with
their key features and risk and reward characteristics; avenues/sectors of economy where
mudarabah based deposits have been deployed; parameters used for allocation of profit,
charging expenses and provisions etc. along with a brief description of their major
components; Mudārib Share (in amount and percentage of distributable income); amount and
percentage of mudārib share transferred to the depositors through hiba (if any); and profit rate
earned vs. profit rate distributed to the depositors during the year.
Rating Agencies
SBP promotes self-discipline in the financial markets of Pakistan through transparency and
sufficient disclosure by the market participants. All banks/DFIs were required to get
themselves credit rated with effect from June 30, 2001. Specifically, banks are required to have
themselves rated by credit rating agencies approved by SBP and disclose their credit rating
prominently in their published annual and quarterly financial statements. Accordingly,
banks/DFIs continuously get themselves credit rated from credit rating agencies on the panel
of SBP and the rating is updated yearly within six months from the closing date of each
financial year.
Both short and long term ratings are made for all banks including Islamic banks and financial
institutions. Banks and DFIs registered in Pakistan are mainly rated by Pakistan Credit Rating
Agency Limited (PACRA) and JCR-VIS while the foreign banks operating in Pakistan are rated
by Standard & Poor’s, Moody’s, FITCH and JCR-VIS. Most of the banks/DFIs have already made
their credit rating public through print media and SBP has also compiled their ratings for the
benefit of the stakeholders.
It is obligatory for asset management companies to get the unit trust schemes that they
manage rated by a rating agency registered with the SECP. Management companies are also
required to widely disseminate ratings of their funds so that institutional as well as individual
investors may make informed decisions.
4.7.6. Consumer Protection Architecture
Consumer Protection and Financial Literacy
The two principal financial regulators, SBP and SECP, have a primary responsibility to regulate
and supervise both prudential matters and market conducts in their respective areas. In the
banking sector, two main entities responsible for implementing, overseeing, and enforcing
consumer protection with respect to banking products and services are SBP (notably but not
exclusively, the Consumer Protection Department) and the Office of the Banking Mohtasib
(OBM). The SBP has issued regulations and directives to banks covering key aspects of
consumer protection including disclosure, business conduct and dispute resolution. It has also
laid out an ambitious agenda for further strengthening consumer protection in its 10-Year
Strategy for Banking Sector Reforms. (WB 2014, Vol. 2)
The SBP Act, 1956 and the Banking Companies Ordinance 1962 (Section 27) provides broad
powers to the SBP for protecting consumers. SBP should take necessary steps in the public
interest and to prevent any affairs that are detrimental to the interests of the depositors or in a
manner prejudicial to the interests of the banking company. SBP has used these powers