SBP moves to boost Islamic finance

DUBAI: The State Bank of Pakistan (SBP) has amended its regulations to exempt Islamic banks from using interest-based benchmarks for some of their financing products, the latest government step aimed at boosting Islamic finance.

Despite a direct ban on charging interest, interest-based benchmarks are used as a pricing reference by a majority of Islamic banks, due in part to the absence of stable and widely-published alternatives.

In a circular, the SBP said Islamic finance institutions would have to outline their alternative pricing mechanism for participatory financing schemes, replacing the use of the Karachi Inter-Bank Offered Rate (Kibor).


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