SBP issues guidelines on Islamic banking

The News International: The State Bank of Pakistan has decided to revise clause 1 (vi) of Appendix A to Annexure I of IBD Circular 2 of 2008, regarding the Essentials of Islamic Modes of Financing (Murabaha) with a view to facilitating the Islamic financial industry.

A circular issued here on Saturday said that now clause (vi) reads: Wherever possible, the invoice issued by the supplier shall be in the name of bank- account client eg 1st Islamic Bank ABC Company as the commodity would be purchased by an agent on behalf of such financier.

In case it is not possible, then specific approval from the Shariah adviser should be sought for the transactions. It is preferable that the payment for such commodities should be made by the financier directly to the supplier or credited in an Escrow Account.

In both the cases, the Murabaha financing account shall be debited only after completion of offer and acceptance between the customer and the Islamic banking institution (IBI). If direct payment to the supplier by the IBI is not feasible for valid reasons, such reasons shall be recorded by the IBI for making payment to the supplier through the agent for purchase of goods. However, in this case proper utilisation of funds shall be ensured by the IBI.

The banks have been advised to see IBD Circular No2 dated March 25, 2008 on the above subject. Other instructions on the subject shall remain unchanged, the circular said.