To encourage out-of-court settlement—including mediation, arbitration, and neutral evaluation—the Securities and Exchange Commission of Pakistan (SECP) has released a concept paper introducing an alternative dispute resolution (ADR) method for Islamic financial contracts.
Developing Islamic finance in the non-bank financial sector under the Strategic Action Plan 2024-26 has finished the concept paper.
The main goal is to provide a specialized ADR mechanism that conforms with Shariah guidelines and values, so offering a Shariah-compliant, quick, and efficient way of settling conflicts, so increasing stakeholder confidence in the Islamic finance industry.
According to the SECP, Islamic finance is a major component of Pakistan’s financial system and a motivating factor behind ethical investments as well as economic progress.
This expansion, though, calls for the creation of efficient conflict resolution systems.
Unique among their alignment with Islamic law are contracts such Musharakah, Modaraba, Murabaha, Ijarah, Wakala, and Istisna.
Traditional litigation might not always fit Islamic values, hence ADR systems designed especially for such contracts are necessary.
