To give boost to the domestic insurance sector, the Securities and Exchange Commission of Pakistan (SECP) has allowed all the incumbent players in the conventional insurance sector to offer Islamic insurance or Takaful under the new Takaful Insurance Rules 2012.
Addressing a news conference SECP Chairman Muhammad Ali said the opening of Takaful window will provide an opportunity to the big players of the traditional market to tap the huge potential through their countrywide operations.
At present the insurance penetration in the country remains 0.7 percent which is lowest in the South Asian region which on the average has 4 to 5 percent penetration. “Allowing Takaful to all companies would help enhance the penetration to 1.2 percent within the next three years, he said adding that meant 70 percent growth in the companies businesses”.
Takaful was introduced six years back and initially only five Islamic insurance companies were allowed to provide the service. The protection was given to them as they started with less capital but now it was hindering further development of the market. “There is huge demand for Takaful insurance in the country as people don’t prefer conventional insurance”, he added.
SECP Chairman said for the growth of capital markets and to involve masses in shares trading, there is a dire need to introduce a concept of certified market player in Pakistan as people without any criteria can be handling life savings of general public in the stock markets. “One certification programme is already being conducted by the Institute of Capital Markets and it would be expanded soon,” he added.
Currently, the certification programme by the Institute of Capital Markets (ICM) is optional for the brokers, dealers’ punters etc but the SECP has plans to make it mandatory for all the market players to get the certification if they were to handle the investor’s money in the stock markets. “We plan to make this requirement mandatory soon. It will be done eventually and the Commission is in process of formulating regulations in this regard,” Chairman SECP said.
The officials said that market players need to know certain wrong practices very often committed around the world are not in line with market ethics like insider trading, front running, market control and market manipulation. “These certification programmes would also impart the knowledge among brokers and dealers that they would be eventually caught and penalised heavily by the regulator,” SECP Chairman said.
The officials said that the exchangers and the brokers also needed to develop various products to attract the investors in stock markets as currently only equity trade is being executed in the capital markets. “We need derivatives, commodity futures, currency futures etc even the mutual fund market is at a limited stage here,” Securities Markets Division Commissioner Imtiaz Haider said.
