- Could you please briefly introduce yourself and share your journey from Islamic scholarship to Islamic banking and Shariah advisory?
Thank you for the opportunity to introduce myself.
I am Mufti Muhammad Imran Awan, a Shariah scholar and Islamic banking and finance professional from Pakistan.
Alongside my Islamic scholarly education, I pursued formal studies in Islamic banking and finance, including a Master degrees in Islamic studies & Islamic Banking and Finance and postgraduate studies in Islamic Finance from University of Karachi, Pakistan.
Over the 17 years, I have had the opportunity to work closely with banking professionals, Shariah boards, compliance teams and other stakeholders in the Islamic finance industry.
This experience has helped me understand that Islamic banking is not simply about replacing interest-based terminology with Arabic terminology; rather, it requires genuine alignment between Shariah principles, legal documentation, banking operations, risk management and the economic substance of transactions.
My work has therefore increasingly focused on Shariah advisory, Shariah governance, product development, Shariah compliance and shariah audit, Islamic banking, bilateral & syndicate structuring for Islamic banking and transformation/conversion of conventional branches, establishment of Islamic Windows & full-fledge subsidiaries nationally and internationally as well e.g. NBP-Afghanistan operations conversion, MCB Bank-Pakistan subsidiary establishment & conversion of conventional branches into Islamic at NBP-Pakistan etc.
I have also remained actively engaged in research, writing and professional training. My research and publications have addressed contemporary issues such as combining contracts, compensation for breach of promise, re-Takaful and reinsurance, and third-party benefits in lending arrangements.
For me, the central objective of Islamic finance is to connect sound Shariah principles with practical, sustainable and ethical financial solutions that can serve modern economies and society.
- With your extensive banking and Shariah experience, what are the key challenges in ensuring effective Shariah compliance in Islamic banks?
In my view, one of the biggest challenges is ensuring that Shariah compliance exists not only at the level of product approval, but throughout the entire life cycle of a transaction.
There are several important challenges.
First, there can sometimes be a gap between the Shariah structure approved by the Shariah Board and its practical implementation at the operational level. A product may be Shariah-compliant in its documentation, but its actual execution must also follow the approved process.
Second, Islamic banking requires strong coordination between Shariah scholars, product development teams, legal departments, operations, risk management, compliance and internal audit. If these functions work in isolation, Shariah risks can arise even when everyone is individually performing their responsibilities.
Third, there is a continuing need to strengthen the understanding of Islamic finance among banking professionals. Similarly, Shariah scholars need a strong understanding of modern banking products, regulations, technology, accounting and risk management.
Finally, Shariah compliance should be viewed as a continuous governance process rather than a one-time certification exercise.
Therefore, effective Shariah compliance requires three things: competent people, strong governance and effective implementation and monitoring.
- You have been involved in converting conventional branches into Islamic branches. What are the most important factors in a successful Islamic banking conversion?
A successful conversion requires much more than changing the name or branding of a conventional branch. It is essentially a transformation of the business model, processes and institutional mindset.
I would highlight few key factors.
First, a clear ownership & Commitment. From top to bottom / from BOD to Management, a clear vision & ownership is essential.
Second, Shariah framework. The products, contracts, processes and documentation must be reviewed and approved before implementation.
Third, proper asset and liability assessment. Existing conventional assets, liabilities, investments and customer relationships need to be carefully reviewed so that an appropriate Shariah-compliant transition mechanism can be developed.
Fourth, operational readiness. Systems, accounting procedures, documentation, customer onboarding, transaction processing and reporting must be aligned with the Islamic banking model.
Fifth, staff training. Employees must understand not only the technical procedures but also the Shariah rationale behind the products. This enables them to explain Islamic banking properly to customers.
Sixth, customer communication & Awareness. Customers should clearly understand what is changing, why it is changing and how the new Islamic products operate.
The most important lesson is that conversion should be treated as a comprehensive transformation project, supported by Shariah governance, management commitment, employee training and continuous monitoring.
- How can Shariah scholars and banking professionals work together more effectively in developing Shariah-compliant products?
The relationship between Shariah scholars and banking professionals should be based on partnership rather than separation.
Banking professionals understand customers, markets, technology, regulations, operational processes and commercial realities. Shariah scholars bring expertise in Islamic jurisprudence and the principles governing financial transactions. Both perspectives are essential and critical organs of governance.
A better approach is for scholars, product specialists, legal experts, risk professionals and operations teams to work together from the beginning. The commercial objective should first be clearly understood, followed by the identification of an appropriate Shariah structure.
At the same time, Shariah scholars should be sufficiently familiar with contemporary financial practices, while banking professionals should have a working understanding of Shariah principles.
The ultimate objective should be to develop products that are simultaneously Shariah-compliant, commercially viable, operationally practical, legally sound and beneficial to customers.
- Based on your experience with AAOIFI Shariah Standards, how important are global standards for strengthening Islamic banking practices?
Global Shariah standards are extremely important for the continued development and credibility of Islamic finance and standard best practices whether these are implemented by countries or taken as reference.
Standards such as those developed by AAOIFI provide a common technical and Shariah reference point for scholars, financial institutions, auditors, regulators and industry professionals. They help reduce unnecessary differences in the interpretation and implementation of Islamic financial contracts.
However, I believe standards should not be viewed simply as compliance checklists. Their real value lies in providing a consistent framework through which the objectives, conditions and limits of Shariah principles can be properly understood and implemented.
My involvement in research, professional training and the study of contemporary Shariah issues has reinforced my view that standardization can significantly improve transparency and confidence in Islamic finance.
At the same time, global standards should allow appropriate consideration of local regulatory, legal and market environments which also will help for innovative ideas and product development.
The ideal model is therefore global Shariah consistency combined with appropriate local regulatory and operational adaptation because standardisation without leniency could be gap for innovation.
- What are the key areas that Islamic banks should focus on to strengthen their Shariah governance and audit frameworks?
Islamic banks should focus on strengthening Shariah governance at three interconnected levels: pre-implementation, implementation and post-implementation review.
At the first level, Shariah Boards should have sufficient independence, authority and access to relevant information. Product structures and documentation should be thoroughly reviewed before approval.
At the implementation level, there should be strong Shariah compliance functions capable of translating the Shariah Board’s decisions into operational procedures. Staff training is particularly important at this stage.
At the post-implementation level, Shariah audit should examine the actual execution of transactions rather than merely reviewing documents. It should identify recurring weaknesses, assess the root causes and ensure that corrective measures are implemented.
I would also emphasize the importance of clear reporting lines, effective Shariah risk management, technology-enabled monitoring and proper escalation mechanisms.
Ultimately, a strong Shariah governance framework should create an environment where Shariah compliance is embedded into the institution’s culture and decision-making process, rather than being treated as the responsibility of the Shariah department alone.
- You have expertise in Sukuk and Islamic capital markets. What opportunities do you see for the future growth of Islamic capital markets?
I see significant opportunities for Islamic capital markets, particularly because investors around the world are increasingly interested in ethical, sustainable and asset-based forms of finance.
Sukuk can play a particularly important role in financing infrastructure, renewable energy, transportation, housing, SMEs and other productive sectors of the economy.
There is also considerable potential for Green Sukuk and sustainability-linked Islamic capital market instruments. These instruments can connect Islamic finance with the global movement toward sustainable development and responsible investment.
For emerging markets, Islamic capital markets can provide an additional source of funding while attracting both domestic and international investors.
However, future growth will require stronger standardization, greater transparency, robust Shariah governance, deeper secondary markets, improved investor education and appropriate regulatory frameworks.
I believe the future of Sukuk should move beyond simply replicating conventional debt instruments. Islamic capital markets have an opportunity to demonstrate their distinctive strengths through asset-based financing, risk sharing, ethical investment and real economic activity.
- What is your outlook for the future of Islamic banking and finance, particularly in Pakistan and other emerging markets?
I am optimistic about the future of Islamic banking and finance, particularly in emerging markets.
There is growing demand from customers, businesses, governments and investors for financial systems that are ethical, transparent and consistent with Islamic principles. At the same time, technological developments are creating new opportunities for Islamic fintech, digital banking, financial inclusion and innovative Shariah-compliant products.
By Federal Shariat Court Decision in April 2022 and 26th amendment in constitution of Pakistan in 2024, Pakistan is legally bound to convert its whole country eco-system into Islamic finance by Dec 31st, 2027.
Therefore, Pakistan has significant potential because of its large Muslim population, established Islamic banking industry, growing awareness of Islamic finance and increasing institutional & constitutional focus on Shariah-compliant financial solutions.
However, future growth should not be measured only by the size of Islamic banking assets. The industry must also focus on quality, authenticity, innovation, financial inclusion, customer protection and economic impact.
For Pakistan and other emerging markets, I believe the next phase should focus on developing Islamic finance as a comprehensive ecosystem involving banking, Sukuk, Takaful, Islamic capital markets, fintech, SME finance, agriculture finance, social finance and sustainable finance.
My vision is that Islamic finance should become increasingly recognized not merely as an alternative financial system for Muslims, but as a credible model of ethical, responsible and sustainable finance for the global community.
The real opportunity is to demonstrate that Shariah principles can provide practical solutions to contemporary financial challenges while contributing to economic development and social wellbeing.