Almost eight months in the making, the Securities and Exchange Commission of Pakistan (SECP) is finally allowing its first cohort to test solutions in its regulatory sandbox.
Opening it up for the first time back in February until mid-March 2020, the SECP said it has received applications from incumbents, foreign companies as well as start-ups. Without revealing the successful applicants nor size of the cohort, the regulator did however confirm that digital insurance, a digital platform for mutual funds, robo-advisory and crowdfunding are among the solutions allowed to operate in a reg-lite environment of up to six months, in accordance with established parameters.
After the experimentation period, the commission will evaluate the viability of the solutions to determine a future course of action which could be to: facilitate the participant in scaling up the solution; formulate a new policy or amend the existing regulatory framework to promote the innovation; or completely prohibit or defer the deployment of the solution if the solution is not suitable for mass adoption.
“SECP believes that testing of technology-driven solutions through [the] Regulatory Sandbox can stimulate financial and technological innovation and broaden the range of financial products for increasing financial inclusion in the country. Such [an] initiative also supplements the SECP’s vision of enhancing financial inclusion and promotion of [the] fintech and insurtech sectors in its regulated domain,” the regulator noted. While it is not clear whether any of the first cohort participants will be testing Shariah compliant solutions, the sandbox regulatory guidelines issued by the SECP in 2019 accommodate Islamic transactions. A strong proponent of the Islamic capital markets, the SECP has on various occasions vocalized its intentions to develop the Shariah fintech market as well.