The Securities and Exchange Commission of Pakistan (SECP) has approved the country’s first Shariah-compliant credit risk-sharing product, enabling Islamic financial institutions to expand financing to underserved sectors such as micro, small and medium enterprises (MSMEs) and agriculture.
According to an official statement, the product, developed by National Credit Guarantee Company Limited (NCGCL), reduces credit risk through a risk-sharing mechanism, while enabling greater access to finance and ensuring compliance with Shariah principles.
SECP says that the new product provides an alternative to existing conventional credit guarantees through a Shariah-compliant risk-sharing model. Under this structure, participating institutions contribute to a pooled fund on a donation, i.e. Tabarru basis, managed by NCGCL as an agent, i.e. Wakeel, under a Wakalah arrangement.
Losses from eligible defaults are covered from this pool, ensuring genuine risk sharing without guaranteed returns.
The SECP’s Shariah Advisory Committee reviewed and approved the structure, noting that it aligns with key Shariah principles. The committee also recommended strengthening governance and documentation for effective implementation.
SECP believes that the initiative is expected to increase access to financing for MSMEs, agriculture, and other priority sectors. It will support financial inclusion and responsible lending and strengthen Pakistan’s Islamic finance ecosystem.
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