Accounting History 2013 Rammal 5 29

463269
2012
ACH18110.1177/1032373212463269Accounting HistoryRammal and Parker
Article Accounting History
Accounting History
Islamic banking in Pakistan: 18(1) 529

The Author(s) 2012
Reprints and permission:
A history of emergent sagepub.co.uk/journalsPermissions.nav
DOI: 10.1177/1032373212463269
accountability and regulation

ach.sagepub.com
Hussain G Rammal
International Graduate School of Business, University of South Australia, Australia
Lee D Parker
School of Commerce, University of South Australia, Australia
Abstract
This study presents a history of the Islamic banking sector, its accountability and regulation in Pakistan, set
in its contexts of the rise of Islamic banking internationally in a global finance marketplace alongside the
localized Islamization of Pakistans economy. The historical analysis is informed by the Economic Theory of
the State and the principles of Islamic theocracy, and examines the events leading to the establishment of
the Islamic banking system in Pakistan, government accountability and regulatory strategies, and the market
response. The findings reveal the complexity of attempts to reform Pakistans banking sector into a purely
Islamic-based system and the contests between government, the central bank and religious authorities for
the sectors accountability, regulation and control. The re-emergence of a dual banking system and its
accountability and regulation for both economic management and theocratic purposes illustrates the ongoing
compromise and accommodation between national religious culture and a global financial environment.
Keywords
Accounting, accountability and regulation, banking and finance, Islamic banking, Pakistan, State Bank of Paki-
stan, nationalization, theocracy
Introduction
Since the establishment of the Dubai Islamic Bank in 1975, the worlds first fully-fledged Islamic
bank (Dubai Islamic Bank, 2010), the Islamic banking and finance sector has experienced rapid
growth and acceptance around the world. This growth has been achieved despite uncertainty
over how the interest-free financing system would operate alongside the existing conventional
financing system. The governments and financial institutions of Muslim nations have worked
towards developing and regulating the current Islamic financial system, which is growing in
Corresponding author:
Hussain G Rammal, International Graduate School of Business, University of South Australia, Level 5, Way Lee Building,
City West Campus, North Terrace, Adelaide 5000, Australia.
Email: hussain.rammal@unisa.edu.au
Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

6 Accounting History 18(1)
acceptance by the wider financial community and presenting itself as an alternative to the con-
ventional financing system.
This article presents an historical analysis and critique of the evolving accounting and account-
ability regulations in the Islamic banking industry in Pakistan. As the first country to attempt to
Islamize the entire banking sector in the 1980s (Murdoch, 2009), Pakistan has faced many com-
mercial, accountability and regulatory challenges in transforming the economy. These challenges
included the introduction of Islamic financing in a regulatory environment that was originally
developed for the operations of the conventional financing system. Today, Pakistan operates a
dual-banking system, where both Islamic and conventional banks compete for market share. While
previous studies have focused on the lack of success, and the contemporary state of Islamic bank-
ing in Pakistan (Ayub, 2002; Khan and Bhatti, 2006; Khan and Mirakhor, 1990), this study inves-
tigates how the sector and its accountability were developed. Furthermore, it analyses the rationales
underpinning the decisions taken by the government and other key players in the promotion and
regulation of Islamic banking and its accountability in that country. Thus, this article examines the
history of the Pakistan banking systems development of relevant accounting practices, accounta-
bility and regulation, and discusses the role of the various players in attempting to make Pakistan
the hub for Islamic banking activities.
The articles analysis is informed by the application of two theoretical perspectives that are
complementary in their applicability to the historical case of Pakistans Islamic banking. These are
the Economic Theory of the State, and Islamic theocracy. Together they offer perspectives on the
role of the state in the distribution of public goods, and Islamic religious principles that inform both
a critical interpretation and an understanding of the historical events and contemporary standing of
Islamic banking in Pakistan.
The article begins by outlining the historiographic approach to the study. The following section
details the theories and concepts used to analyse the Islamic banking sector in Pakistan, after which
there is a brief introduction to accountability in Islamic finance. The article then moves on to pre-
sent an historical overview of Pakistans accounting profession and related regulatory develop-
ments. This sets the scene for an historical analysis of the Islamic banking regulatory environment,
and the consequent emerging contemporary banking and reporting regulation environment. The
article concludes with a discussion on the lessons learnt from the Pakistani experience for other
countries attempting to develop their Islamic banking and finance sectors.
An historical orientation
This article draws upon a common historiographic orientation advocated by Merino and Mayper
(1993), Funnell (1996), Fleischman et al. (1996a), and Merino (1998), who have all argued for the
co-existence and mutual complementarity of differing theoretical and historiographic schools of
thought and historical methodologies. They have argued the merits of an eclectic, multi-theoretic
and multi-methodological range of enquiry. Fleischman et al. (1996a) argued for the cumulative
additions to knowledge obtainable through the application of multiple lenses applied to the same
data. Accordingly, this article offers a narrative and interpretive study combining two theoretical
lenses to illuminate the regulatory and accountability elements of Islamic banking in Pakistan. In
doing so, we draw upon insights from a variety of historians and historiographers ranging from
conservative traditionalists to critical scholars.
This historical narrative and interpretive analysis has also been informed by Carnegie and
Napier (1996, 2012), who, consistent with the abovementioned accounting historians, have
also advocated the accommodation of both critical and interpretive research in accounting history.

Rammal and Parker 7
This studys analysis is theoretically informed and disposed towards offering both explanation and
critique of the subject under study, including past and present Islamic banking accountability and
regulatory practice. This study also bears the imprint of Funnells (1998) historiographic insights
into the relationship between narrative history, and interpretive and explanatory history, in which
he argues that historical narrative in itself implies elements of interpretation and explanation. As
Elton (1967) earlier observed, historical analysis and interpretation must incorporate historical nar-
rative, while at the same time analysis is itself embedded in any historical narrative. In addition,
consistent with Carnegie and Napiers (1996, 2012) reflections, this article pays distinct attention
to the political, religious, regulatory, and banking industry contexts as crucial elements of the nar-
rative portrayed herein. While for convenience of representation in this particular article, a linear
time line of narrative is provided, we are particularly conscious of the multiple possible concep-
tions of time that can be invoked in an historical study (Parker, 2004). The approach adopted by
this article also reflects the influence of historicism in its consideration not only of structures and
events of the past, but of Pakistani government, social and religious culture, and values pertaining
to the period under examination (Tholfsen, 1967; Tosh and Lang, 2002). Events, decisions and
their conditioning influences have been critically investigated from a perspective of Islamic bank-
ing and its regulatory environment in Pakistan (Bedeian, 1998; Von Humboldt, 2009).
We are concerned to examine how these banking related issues and events have interacted
through the past into producing the complexities of the present (Butterfield, 2009). Accordingly,
this article offers an explanatory narrative that reflects Dale Porters (1981) theory of historical
explanation, incorporating an intertwined story and explanation of a temporal process of change
and its attendant conditions. This approach offers a bridge between realist-empiricist historians
focusing on building accounts of the past from historical evidence, and instrumentalist-construc-
tionist historians who aim to explain contemporary situations by recourse to developing accounts
of their prior history (Guthrie and Parker, 1999).
In presenting this historical account of change and evolution, argument and judgement are inev-
itable tools in our reconstruction and interpretation of the political, religious, social and economic
world in which these banking accountability and regulatory systems were established (Barzun and
Graff, 1985; Stanford, 1986, 1998). Following Atkinson (1978), this approach can generate inter-
pretations and explanations that are authentic and credible. Accordingly, the study aims to contrib-
ute to the foundations being laid in the accounting and finance literatures for informing future
policy and practice in Islamic financial management and accountability (Parker, 1997).
This historical analysis recognizes that past institutions and cultures inform our present beliefs
and practices that emerge as incrementally conceived, reinterpreted and transformed over time.
Particularly in this historical case, policy, practice and regulation result from the intersection and
interaction of social mores, governmental attitudes, and religious beliefs (Bedeian, 1998;
Fleischman et al., 1996b). This potentially offers us windows into what has worked in the past
and what has not, thereby laying foundations for identifying and contemplating precedents and
choices for contemporary practice (Parker, 1999).
This historical account is subject to methodological limitations. As Elton (1967) has argued, no
history can assemble and represent all possible information about a particular historical case and
its constituent events, participants, and circumstances. It involves judgement in selecting relevant
and significant elements and configuring them into patterns, stories, interpretations and explanations.
Nor can historians claim to identify the causes of key events, but rather aim to offer and justify
contingent arguments for the most plausible and probable conditioning influences (Leff, 1971;
Previts et al., 1990). Thus, our historical understanding and interpretation is incremental, cumula-
tive and revisionist, as successive histories bring to light informative accounts of past events that

can all contribute to our understanding of present-day practices and their contexts (Fleischman et al.,
1996b; Parker, 2004; White, 1965).
Such a history, as presented here, attempts to build a collective historical memory of prior
events and their contexts, revealing past cultures, choices, limitations, precedents, and strategies
that have shaped present-day institutional reactions and practices. Such understandings can contex-
tualize and influence contemporary decisions concerning Islamic banking policy (Heller, 1982;
Oldroyd, 1999; Parker, 2004; Southgate, 1996).
Theoretical background
This study draws upon the Economic Theory of the State and the ideals of theocratic law to analyse the
evolution of the accounting and accountability regulations in the Islamic banking sector in Pakistan.
The application of these theories assists in building explanations of the actions of major players influ-
encing the Government of Pakistan to Islamize the economy and, in particular, the banking sector.
Economic Theory of the State

The Theory of the State focuses on the role a State plays in the governance of a society. In order to
understand the theory it is important to first describe what constitutes a State. Whynes and Bowles
(1981: 8) define a State as: an association of individuals, each of whom conforms to social rules
laid down and enforced by a social decision maker. Thus, according to this definition, individuals
tend to support the formation of a State as long as the benefits of acting cooperatively are visible.
In the case of Pakistan, a new nation state emerged when the All-India Muslim League sought a
separate homeland for Muslims of the sub-continent. Using Whynes and Bowles (1981) defini-
tion, Pakistan can be classified as a State where the Muslims of the Indian sub-continent chose to
form a new identity, in which the citizens would be permitted to practise their faith and the rules of
the State would be in conformity with Islamic values, traditions and laws. The Theory of the State
has been used by philosophers, sociologists, political scientists and the anthropology fraternity
over the past few centuries to provide various perspectives on what constitutes a State, the legiti-
macy of its control and power, and the role it should play (see for example Bluntschli, 1885;
Duncan, 1982; Krader, 1968; Lee, 1974; Vincent, 1987).
Historically, the theorys application has been limited in the business and economics literature,
despite most economists recognizing the role of the State in the development of the economy
(Carver, 1982; Das, 2006). However, the emergence of the Economic Theory of the State, where
the focus has been on the economic management rather than the political legitimization of the
State, has resulted in increased use of the theory in the accounting literature (see for example
Alexander and Servalli, 2010; Bartocci and Lucentini, 2010; Lemarchand, 2010; Miller, 1990;
Tinker, 1984) and economics literature (Barzel, 2002; Delorme, 1984; Hardin, 1997). These stud-
ies focus on the role of the State in the development of accounting regulations and accountability
(Miller, 1990; Tinker, 1984). The use of this theory is therefore relevant in analysing the decisions
made and steps taken by a State to manage the national economy.
The Economic Theory of the State focuses on the role the State plays in managing the economy
and whether the State retains ownership of the institutions that are responsible for the economic
activities within a state (Barzel, 2002; Delorme, 1984; Jessop, 1987). For the purpose of this study,
the features of public goods, property and property rights (ownership and control) described in the
Economic Theory of the State are of particular relevance to our analysis of the Islamic banking
sector in Pakistan (Hardin, 1997).

Rammal and Parker 9
Whynes and Bowles (1981) describe three models of property rights. The first model proposes
that the citizens of the State elect to have a set of rules that exhaustively allocate all rights of prop-
erty and, accordingly, all resources to individual members of the State. In the second model, all
resources are owned collectively, that is, all individuals in the State have full ownership rights in
all property (Olson, 2000). Both these models are seen as being contrary to the ideals of a develop-
ment state. Too much State control can be harmful to competition and too little control by the State
can potentially lead to a situation of power-dependence in the society caused by monopolies. The
third model of property rights is considered to be the most practical, and proposes that certain
property rights rest with individuals whilst the remainder resides with the collective and is con-
trolled by the social decision-maker (Baumol, 1965; Buchanan, 1975).
When the State believes that there has been a market failure in allocating resources to the soci-
ety, the State may step in and take appropriate action (Altman, 2006). This action can involve
revoking the property rights of the individual and taking over control of the property to ensure fair
allocation of the resources. Thus, the State acts as a governing body and intervenes when it deems
it necessary to ensure that the collective interest of the State is not harmed.
The use of the Economic Theory of the State for this study is appropriate as the banking sector
is widely regarded as the fundamental economic driver of the State. In the Pakistani context, the
establishment of the Islamic banking sector and its emergent regulatory environment has been a
result of the partnership between the Government of Pakistan, Muslim religious leaders and schol-
ars, and the banking sector, where the banks are highly dependent on the Governments policies
and legislation.
Islamic theocracy
The principles and features of Islamic theocracy have been the subject of increased academic and
practitioner research over the last two decades. Previous literature on the influence of theocracy in
economic affairs has mainly been concerned with the role of the Christian Church in United States
Government policies or with the Islamic theocracy in Iran and its influence on the economy and
trade (Amuzegar, 1997; Davidson and Harris, 2006; Hull and Bold, 1989; Phillips, 2006;
Tamadonfar, 2001; Webber, 1997). In the post-September 11 era, there has been a renewed interest
in studying the influence of Shariah on government policy and economic systems (Acharya, 2007;
Philpott, 2002).
Shariah is based on the teachings of the Quran and Sunnah (written or oral traditions of the
words and deeds of the Prophet Muhammad), and provides guidance for the way Muslims should
live their lives. In order for a State to be classified as an Islamic State, not only should the
Muslim population lead their lives according to the teachings of the Quran, but the laws of the
State should also be consistent with Shariah (Mutalib, 1993). Many Muslim majority States have
been unable to apply Shariah as the principal law for various reasons; one of which has been the
legacy of the Western legal system left behind from the colonization era. Iran, Sudan and Saudi
Arabia, for the large part, follow Shariah law in all State activities, but for countries like Malaysia
and Pakistan, the application of Shariah is undertaken in conjunction with Common Law.1 In
instances where the Common Law requirements are seen to be in breach of Islamic law, the Shariah
Courts of the country may rule in favour of Islamic law replacing those requirements.
The constitution of Pakistan dictates that all laws should be in conformity with Shariah
(Constitution of Pakistan, 2010). As such, the State is responsible for the application of Islamic law
in various socio-economic institutions that had inherited British Common Law following the crea-
tion of the State in 1947. The requirement that the laws of the country should follow Islamic law,

has been interpreted by many to mean that Shariah would be the guiding legal force in the
country.
Pakistan was the first country in the world to declare itself an Islamic Republic in 1956
(Choudhury, 1956), and follows the Westminster form of democracy, with the State therefore gov-
erned as a democratic Islamic Republic. Across the countries in which it has been introduced, the
Islamic banking and finance sector has been built on the Islamic principle of prohibition of riba
(interest) in financial activities. Therefore, the analysis of the influence of Islam on the laws of
Pakistan, the governance of the State, and the emergence of the Islamic banking sector and its
related regulations in the light of Islamic theocracy is relevant and justified for this study.
The economic management of the State and conformity to Shariah are both essential elements
of Islamic banking in Pakistan. To understand the history of Islamic banking in Pakistan, it is nec-
essary to consider the interplay between the State, the religious authorities, and the banking indus-
try. Thus, the use of the Economic Theory of the State and the principles of Shariah assist in the
analysis of the influences of the various forces and events that led to the establishment of the
Islamic banking sector in the nation.
Accountability in Islamic finance

The guiding principle in Islamic finance is the prohibition of riba (interest) in financial activities
(Aggarwal and Yousef, 2000; Choudhury and Hussain, 2005). But Islam does not prohibit financi-
ers from earning a profit, as long as the gain made on the original amount is directly related to the
risk undertaken on the investment (Djojosugito, 2008; Siddiqui, 1987). Under Shariah, gains made
on investment without risk are treated as interest rather than profit.2
The present-day revival of Islamic finance began during the 1950s and 1960s as the colonial era
came to an end and the newly independent Muslim states reassessed their economic policies
(Warde, 2000). Preceding the formal commercial beginning of Islamic financing in the 1970s,
small-scale limited scope interest-free institutions were tried between the mid 1940s and 1960s in
Malaysia and Pakistan (Gafoor, 1996). According to Maali et al. (2006), the philosophy of these
institutions was based on initiatives to achieve social goals. Similar moves made by many loan
cooperatives in the Indian subcontinent were influenced by religious ideals and mutual loan experi-
ments in Europe (Warde, 2000).
Islamic banks have now expanded worldwide and the system continues to grow at the rate of
1520 per cent annually (Kasolowsky, 2009). Islamic financing products are offered by fully
fledged Islamic banks (banks that only deal with Islamic financing products) and via Islamic win-
dows (a stand-alone branch of a conventional bank that offers Islamic financial products) (Hassan
and Lewis, 2007; Warde, 2000). Today, Islamic banking and finance operates in both Muslim and
non-Muslim countries, and the assets of the Islamic finance sector are expected to reach the US$2
trillion mark by 2015 (Dubai International Financial Centre, 2010).
The activities of the Islamic banks and financial institutions must be seen in the context of their
particular accountability ethos and environment. As Maali et al. (2006) and Maali and Napier
(2009) point out, an Islamic view of accountability has its foundation in two key building blocks.
First, the concept of tawhid (the concept of monotheism in Islam) that demands complete submis-
sion to Gods will and adhering to the tenets of ones faith in all aspects of life, and second, the
notion that God is the ultimate owner of everything, with humanity merely acting as a trustee or
vice-regent (khalifah) of Gods possessions. Compliance with Shariah becomes an action of obedi-
ence to Gods will. Thus, organizations such as Islamic banks have an obligation to prioritize their
effect upon and accountability to the Islamic community and society (ummah).

Rammal and Parker 11
The State has a responsibility to ensure that Islamic banks carry out their activities in compli-
ance with Shariah and is expected to establish appropriate governance and regulatory frameworks.
As Maali et al. (2006) contend, this requires a broader scope of accountability than traditional
Western economic concepts employ. Accountability extends beyond immediate stakeholders, such
as shareholders, creditors, etc., to include accountability to society at large and ultimately to God.
Thus, a government attempting to Islamize its economy must, in its regulatory interventions in the
banking and finance system, reflect and implement more far-reaching ideas about accountability
than governments necessarily do in a Western economy. In addition, the Islamic view of account-
ability prioritizes accountability to God while nonetheless also including accountability to society
and all other stakeholder sub-groups (Napier, 2009).
Therefore, an Islamic economy and its related accountability relationships embrace a holistic
intention of balancing the spiritual and physical needs of all humans, enabling equitable wealth
distribution across the community of Muslims (Kamla, 2009). It also poses challenges for banking
organizations that make profits, since Islam requires profit to be earned through effort and not
through interest on loans, and additionally warns against exploiting weaker parties, maximizing
profit and generating excessive profit (all more characteristic of a Western free-market economy)
(Kamla et al., 2006). Hence, from an Islamic theocracy perspective, the Islamic banking account-
ability bar is notionally set significantly higher than for Western commercial banking organiza-
tional counterparts. While the latter group may pay lip service to a range of stakeholders, arguably
their shareholders are given priority in terms of perceived accountability relationships and report-
ing focus. Islamic banks, however, face not only accountabilities to shareholders, but given the
prohibition on them of dealing with debtors and creditors, they owe accountability to a broader
definition of shareholders than the Western commercial banks. The accountability of Islamic banks
to wider society and to God represents a focal priority, given the religious values that are absolutely
central to such organizations core values and mission.
Accounting regulatory developments in Pakistan

Situated in South Asia and with a population of 184 million people,3 Pakistan is the sixth most
populated country in the world (Population Reference Bureau, 2010). The demand for Pakistan, a
proposed country that would be the homeland for Muslims in South Asia, was put forth in a resolu-
tion in Lahore by the All-India Muslim League on 23 March 1940 (Ahmed, 1997), and on 14
August 1947 Pakistan came into existence. Today, more than 97 per cent of Pakistans population
are followers of Islam, making it the second most populated nation in the Muslim world after
Indonesia (Pew Research Centre, 2009). As such, religious beliefs heavily influence the national
and business culture of Pakistan (Karim, 2008). The move to Islamize the Pakistani economy
began with the passing of the constitution in 1956 (Constitution of Pakistan, 2010). The new con-
stitution not only proposed that Pakistan be renamed as the Islamic Republic of Pakistan (making
it the first Islamic Republic in the world), but also proposed that certain steps be undertaken to
ensure that Muslims in Pakistan be permitted to live in a truly Islamic country where the laws of
the land will be consistent with the principles of Shariah. Pakistan has attempted to follow a
Westminster-style of parliamentary democracy (Kamran, 2008). However, for most of Pakistans
history, it has been governed by the military,4 which in the 1980s placed an emphasis on the rule of
Islam, prompting authors like Noman (1988) to refer to the countrys ideology as a military the-
ocracy. Here immediately we see the confluence between the economic management role of the
state and the Islamic theocratic principles that directly influence patterns of belief, lifestyles, social
customs and business practices in the Pakistan context.

The formalized history of accounting in Pakistan dates back to the time of British rule when the
Companies Acts of 1850 and 1857 were enacted in the Indian sub-continent. These Acts required
companies to submit their accounts and audit reports to the government. The account keeping and
reporting requirements were further refined in the Companies Act of 1913, which mandated com-
panies to keep accounts of their assets and liabilities (Ashraf and Ghani, 2005a, 2005b). The
Auditors Certificate Rules of 1932 made the certification of auditors compulsory and only those
individuals who had received a diploma and had obtained an official government licence could act
as auditors.
After it gained independence in 1947, Pakistan adopted the Companies Act of 1913 and the
Auditors Certificate Rules of 1932 as accounting and auditing standards for companies. The newly
independent Pakistan was faced with a shortage of qualified cost accountants. To address this issue,
in 1951 the Government of Pakistan established the Pakistan Institute of Industrial Accountants
(PIIA) as a not-for-profit educational organization (Ashraf and Ghani, 2005a; Saeed, 1999). The
first effort to institutionalize the profession was made in 1952 when registered accountants formed
the Pakistan Institute of Accountants (PIA). The Institute was a private organization that looked
after the interests of its members and lobbied the government in relation to issues faced by the
accounting profession.
The Chartered Accountants Ordinance of 1961 constituted a body corporate by the name of the
Institute of Chartered Accountants of Pakistan (ICAP) with the purpose of regulating the account-
ing profession in Pakistan (Institute of Chartered Accountants of Pakistan, 2011; Securities and
Exchange Commission of Pakistan, 2010). The establishment of ICAP was partly a result of the
PIAs efforts to create an autonomous professional organization that looked after the interests of
accountants in the nation. In 1966, the Cost and Management Accountants Act was passed which
granted statutory status to the PIIA and made it responsible for regulating the profession of cost and
management accountants5 (Institute of Cost & Management Accountants of Pakistan, 2011).
Further institutional development in Pakistan was undertaken in 1970, when the Securities and
Exchange Authority (SEA) was established by the government. A semi-autonomous body, the
SEA (later renamed as the Corporate Law Authority) developed rules to improve the financial
reporting practices of Pakistani companies. These rules included mandatory publication of semi-
annual accounts for all listed companies and disclosure of transactions between associate compa-
nies. These rules came into effect in 1972 (Ashraf and Ghani, 2005a).
In 1974, both the ICAP and PIIA became associate members of the newly founded International
Accounting Standards Committee (IASC). The IASC came into existence in 1973 and was respon-
sible for the application of International Accounting Standards (IAS) (International Financial
Reporting Standards, 2011). Since Pakistan had not established its own accounting standards,
ICAP recommended that its members prepare their financial statements in conformity with IAS.
However, this was not made mandatory until 1984 when the Companies Ordinance was passed and
all listed companies in Pakistan were required to comply with IAS (Ashraf and Ghani, 2005b;
Saeed, 1999). The Ordinance also contained certain new requirements, which the companies had
to follow when preparing their reports. These included disclosure of remuneration, disclosure of
funds transfers to associated companies, and disclosure of any adverse remarks contained in the
auditors report.
During the 1980s and 1990s Pakistan borrowed heavily from external institutions such as the
IMF and the Asian Development Bank (ADB). Pakistans inability to repay these loans led to
demands for capital market reforms by the donor institutions (Ashraf and Ghani, 2005a; Narayan
and Godden, 2000; Narayan et al., 2000). In 1997, the Securities and Exchange Act was passed
which resulted in the restructuring of the Corporate Law Authority. In 1999, the restructuring

was completed and the Corporate Law Authority was succeeded by the Securities and Exchange
Commission of Pakistan (SECP), which was made responsible for regulating the securities mar-
ket, and for mergers and acquisitions of companies (Securities and Exchange Commission of
Pakistan, 2011).
The financial reporting and preparation of financial documents by companies in Pakistan
improved during the 1990s as the SECP and ICAP continued to adopt the standards issued by the
IASC and its successor, the International Accounting Standards Board (IASB). Pakistan has also
committed itself to adopting International Financial Reporting Standards (IFAS) (Deloitte Global
Services Limited, 2010). In 2010, ICAP informed the International Federation of Accountants
(IFAC) that all IFRSs had been notified by the SECP for application by listed companies, with
eventual adoption expected by January 2012 (International Federation of Accountants, 2010).
While IFRS appear to be ready for formal adoption in 2012, this may reflect only a formal manifest
compliance with commercial international accounting requirements for maintaining corporate and
national credit ratings, and attracting and retaining international finance. Whether actual compli-
ance occurs remains in some doubt, and awaits the passage of time and further resulting evidence.
This possibility is indicated, for example, by previous history in Pakistan, when IAS were formally
adopted in 1973 but not mandated in reporting until 1984.
With regard to Pakistans public sector accounting and auditing practices, the World Bank has
identified deficiencies in comparison with world standards, and has recommended the adoption of
International Public Sector Accounting Standards (IPSAS), which would require the Government
of Pakistan to prepare statements on an accrual basis (World Bank, 2007). In response, the
Department of the Auditor General of Pakistan6 has adopted the International Organization of
Supreme Audit Institutions (INTOSAI) Auditing Standards and Code of Ethics (Auditor General
of Pakistan, 2011). Pakistan is in the process of adopting IPSAS standards on cash accounting and
is being supported by the World Bank through the Pakistan Improvement of Financial Reporting
and Auditing project to gradually move to accruals (World Bank, 2011).
Accountability in Islamic banks in Pakistan

Pakistans central bank, the State Bank of Pakistan, commenced its operations on 1 July 1948 and
was charged with the duty to regulate the issuing of bank notes and keeping of reserves with a view
to securing monetary stability in Pakistan (International Monetary Fund, 2005). From 1947 to
1974, the private sector invested heavily in the establishment of new commercial banks while the
State Bank granted licences to foreign banks to establish their operations in Pakistan (Khan, 2008).
In 1974, in response to the public perception of unequal growth in the economy, the government
nationalized the banks, insurance companies, educational institutions, utilities and other industries
(Rammal, 2008). The governments action was consistent with the Economic Theory of the State,
which suggests that the State may intervene directly in economic matters if it feels that the activi-
ties of the private sector are not providing sufficient benefits to the society (Whynes and Bowles,
1981). Thus, after the nationalization, the public sector was made responsible for the provision of
all infrastructures and a significant portion of manufacturing activities. By way of a new account-
ability initiative, the government also instituted a new organization called the Pakistan Banking
Council, which was made responsible for overseeing the operations of the nationalized banks. This
decision led to the weakening of the authority of the State Bank of Pakistan over the banking
sector.
The Pakistani Governments first major contribution to the Islamic finance sector was made in
the 1970s during the regime of Zulfiqar Ali Bhutto when it hosted the Islamic Summit of Muslim

Nations (also known as Organization of the Islamic Conference) in Lahore, 2224 February 1974
(Ali, 2005; Rizvi, 1983). It was during this event that Islamic banking and finance received the
official support of Muslim nations, with the summit members agreeing to the establishment of the
Islamic Development Bank. In February 1979, the Government of Pakistan, acting on the recom-
mendations of the Council of Islamic Ideologys (CII) interim report, announced that the Pakistani
economy would be interest-free within a period of three years (Khan, 2008). The conversion of the
operations of commercial banks to a non-interest basis was considered a much more complex task,
and therefore had to be spread over a longer time period.
In June 1980, the final report of CII was produced. It provided a detailed framework for reor-
ganization of banking practices and procedures on the basis of the profit and loss sharing instru-
ments of mudaraba (finance trusteeship) and musharaka (equity partnership). The CII report
emphasized that the ideal Islamic techniques to replace interest in the banking and financial
fields would be profit and loss sharing instruments and qard-e-hasna (loans given to the poor
and destitute in the name of Allah). However, the report recognized that it might be difficult to
change the entire system to profit and loss sharing, and approved other financing methods such
as leasing and hire-purchase agreements (Council of Islamic Ideology, 1980). Reflecting an
Islamic theocratic accountability perspective, the report warned that the use of these financing
agreements should be kept to a minimum as these may be used by some financiers to charge
interest under the guise of return on investment. As a result, the Government of Pakistan made
changes to the State Bank of Pakistan Act and made the State Bank responsible for overhauling
the existing bank legislation to help facilitate the move towards an interest-free economy (Khan,
2008; State Bank of Pakistan, 2003).
The directive by the State to Islamize the economy and, in particular, the banking sector, high-
lights the influence of Islamic teachings on the ideology of the State of Pakistan. The role of the
State in the case of Pakistan has thus not been limited to ensuring that wealth is distributed evenly
in the society, but has also been concerned with ensuring that wealth creation is undertaken accord-
ing to Shariah principles. Here, then, we observe a interaction of government banking accountabil-
ity and regulation strategies that reflect the interaction of elements of the Economic Theory of the
State and principles of Islamic theocracy, whereby government has again intervened in the opera-
tions of the market to invoke the banking sectors... accountability for and compliance with Shariah
principles, attempting a balance between prudent national economic management and a reflection
of growing societal religious philosophies and practices.
The banking sector faced further challenges with regard to implementation of the governments
interest-free economic vision. The State Bank of Pakistan lacked the research and development
advisory facilities that might assist in the Islamization process, and there were inadequate Islamic
Shariah training schemes for bankers. A number of Islamic scholars expressed concerns over the
authenticity of the mark-up financing practice in Pakistan (Usmani, 1998). Responding to the pres-
sures for Islamic theocratic accountability, in 1985 the President of Pakistan, General Zia-ul-Haq,
admitted that the Government had been unsuccessful in eliminating interest from the economy and
financial sector (Khan, 2008; Mehmood, 2002). Thus, from Economic Theory of the State and
Islamic theocracy perspectives, the Pakistan Governments economic intervention in the structure
and processes of its banking industry with a view to converting it to an Islamized religious princi-
pled system had met with significant resistance, subversion, and indeed failure. These two objec-
tives, economic efficiency and Shariah (religious) accountability and compliance, appear to have
conflicted in the banking system in practice, and in its regulatory administration.
The acknowledgement of this failure by the Government of Pakistan highlighted that the State
had not planned on how the Islamization of the economy and the banking system, and the

maintenance of effective accountability, would be carried out. The tools and strategies required to
carry out a change (for example in banking practices, accountability and regulation) of such a
magnitude were not developed, and the lack of information and knowledge meant that the indi-
viduals involved in the banking sector were not ready for such a move.
In the 1990s, the government decided to de-nationalize and privatize the banking sector. The
Pakistan Banking Council was no longer seen as relevant to the changing needs of the sector and
was duly abolished. This resulted in the overall control and authority over the banks being returned
to the State Bank of Pakistan. The move to de-nationalize the banking sector signalled the States
intention to hand over control and significant accountability to private-owned market players. This
also meant that any further Islamization of the banking sector would now be a decision made by
the private sector rather than the State. The banks were therefore able to introduce and promote
those Islamic financial products that fulfilled the needs of their clients. Through State intervention,
this effectively represented a weakening of the influence of Islamic accountability requirements
upon Islamic bank operations, strategies, and associated reporting.
In 1991, the banking sector was again in the spotlight when the Federal Shariat Court (FSC)
ruled that certain banking practices in Pakistan did not conform to Islamic principles (Federal
Shariat Court, 1991). The decision had the potential to make all contracts void, and the borrowers
would not have to repay any amount in excess of the principal amount. The Pakistani banks unsuc-
cessfully challenged this decision, and in 1999 the Shariat Appellate Bench of the Supreme Court
of Pakistan announced the decision to uphold the Federal Shariat Courts ruling and declared inter-
est as unlawful (British Broadcasting Corporation News, 1999). The court ruled that existing laws
relating to banking and finance would need to be removed by 30 June 2001 (Supreme Court of
Pakistan, 1999). The bench resolved that the mark-up practice used in murabaha was an interest-
based activity because it involved lending on the basis of mark-up or fixed rent on the loaned capi-
tal and guaranteed a return for the lender (Supreme Court of Pakistan, 1999). The court also ruled
that the existing profit-and-loss sharing financing arrangements in the financial system of Pakistan
were based on interest, and confirmed the FSCs verdict that bills, debentures, bonds and other
commercial instruments should be banned under Islamic Shariah (Supreme Court of Pakistan,
1999). The court directed the Institute of Chartered Accountants of Pakistan (ICAP) to play a role
in the Islamization of the economy by preparing standards and regulations that would address
reporting and other accounting and accountability issues relating to the Islamic banking and finance
sector (Securities and Exchange Commission of Pakistan, 2005). The full judgement of the court
consisted of 1100 pages, making it the most voluminous judgement ever delivered by a superior
court in Pakistan.
In the year 2000, United Bank Limited filed a Civil Shariah Review Petition which sought a
review of the judgment passed by the Shariat Appellate Bench of the Supreme Court (Supreme
Court of Pakistan, 2002). The Government of Pakistan, sensing that it was running out of time
to carry out the transformation of the economy by the deadline imposed by the Shariat Appellate
Bench, followed the lead of the United Bank. In 2001, the Government filed an application with
the Shariat Appellate Bench requesting suspension of the operation of the judgment and exten-
sion of time for its implementation (Khan, 2008; Mehmood, 2002). After hearing supporting
arguments from the federal government and the parties concerned, the Shariat Appellate Bench
extended the period for implementation of the judgment until 30 June 2002 (Khan and Bhatti,
2006).
In 2002, the Shariat Appellate Bench, which consisted of newly appointed judges, took up the
review appeal filed by United Bank and the Government of Pakistan. The counsel for the government
argued that according to the constitution of Pakistan, the FSC had no jurisdiction to embark upon

declaring riba illegal. The constitution placed a duty upon the federal government and not the FSC
to eliminate riba as early as possible, and therefore the FSC, as well as the Shariat Appellate
Bench of this Court, had no jurisdiction to set deadlines for elimination of riba (Supreme Court of
Pakistan, 2002).
The counsel argued that the hearing for the original appeal to the Shariat Appellate Bench did
not consider the opinions of eminent jurists, and alleged that these views were not considered as
they did not match those of the said judges (Supreme Court of Pakistan, 2002). The government
also claimed that the alternative banking and financial system proposed in the previous judgment
under review was not at all workable and the government had found it incapable of being
implemented.
On 24 June 2002, the Shariat Appellate Bench ruled that the previous decision by the bench in
1999, as well as the FSC ruling, required further clarification and therefore the case should be sent
back to the FSC for further review. This decision was seen as a major blow to the Islamization
process, and since then the FSC has made no further ruling on the interest-free economic model.
The dual system of finance and accountability

The court rulings demonstrate that while the State aimed to apply Islamic theocracy, it failed to
create a banking system that would be sufficiently accountable and able to self regulate. The State
did not set up the relevant regulatory and educational infrastructure required to transform an econ-
omy that followed a capitalist system to one that was based on Islamic laws and regulations. The
lack of regulations and standards in the Islamic banking sector resulted in the application of rules
and the development of financial products that were considered by many religious scholars in
Pakistan to be against the teachings of Islam. With the State controlling the economy, one would
expect stronger regulations to ensure that Islamic laws are interpreted and applied in a way that is
approved by Islamic jurists. But the FSCs ruling would suggest that the combination of theocracy
and State economy failed to effectively and mutually reinforce each other in securing financially
viable and Shariah compliant practices and accountabilities.
According to the Theory of the State, when the State decides to intervene in the market econ-
omy and takes control of particular institutions or industries, it also takes on the responsibility of
regulating them and managing them in an efficient manner that benefits the society. This responsi-
bility in an Islamic State like Pakistan must also include an additional duty for the State to ensure
that accountabilities and associated regulations that have been developed are also in conformity
with Shariah. In Islamic law, the State or ruler acts as the khalifah and is responsible for ensuring
that the rule of God is applied to all activities within the State and that there is ijma (consensus of
religious scholars and leaders) on how these activities should be carried out. In the case of the
Islamic banking sector in Pakistan, the lack of ijma among the religious scholars (as evidenced in
the FSCs ruling) regarding Shariah compliance of financial products would suggest that the
Government of Pakistan was unable to fulfil its obligations to set up effective monitoring and regu-
lating mechanisms.
In the aftermath of the decision of the Shariat Appellate Bench of the Supreme Court, Pakistan
embarked on a policy of a dual system of conventional and Islamic finance, similar to the one fol-
lowed in Malaysia. This gave consumers a choice between conventional and Islamic financing
options. Under this dual system, both Islamic banks and conventional banks could now operate in
the Pakistani market. In addition, some conventional banks also responded to this development,
providing Islamic financial products through dedicated Islamic banking branches (Islamic
windows).

In September 2001, the government announced that the move to an interest-free economy would
be incremental so as to avoid disruptions to national financial processes (State Bank of Pakistan,
2008). On 1 December 2001, the State Bank of Pakistan issued detailed accountability criteria for
setting up an Islamic commercial bank in the private sector. The criteria included the presence of
Shariah advisors in Islamic banks who were made responsible for ensuring that the banks opera-
tions were Shariah compliant. This move was seen as a step towards creating ijma within the
Islamic banking and finance sector and to reduce the potential for disagreement between the reli-
gious scholars and the banking sector.
The Shariah scholars were members of the banks Shariah Supervisory Board (SSB), which
was expected to ratify the introduction of new Islamic banking products and to act as an internal
religious audit committee charged with ensuring Islamic bank compliance with Shariah account-
ability requirements. The SSB would hold the management accountable for the banks activities
and verify at the end of the financial year that the transactions of the institutions were Shariah
compliant. The first Islamic commercial banking licence was issued in January 2002 and the first
Islamic bank in the country commenced fully-fledged commercial banking operation from
March 2002 (State Bank of Pakistan, 2008). In January 2003, the State Bank issued a circular
that detailed instructions for setting up subsidiaries and stand-alone branches for Islamic bank-
ing by existing commercial banks. The circular emphasized the complete segregation of accounts
of Islamic banking subsidiaries from the parent bank undertaking conventional banking (State
Bank of Pakistan, 2008).
Accompanying regulatory developments also ensued. On 15 September 2003, the State Bank of
Pakistan established the Islamic Banking Department (State Bank of Pakistan, 2008). The
Department was given the task of promoting and developing Shariah accountable and compliant
Islamic banking as a parallel and compatible banking system in the country (Qureshi, 2007). Since
its inception, the Islamic Banking Department of the State Bank of Pakistan has introduced a range
of regulations relating to the operations of Islamic financial institutions. These include fit and
proper criteria for the selection of Shariah advisors and the Shariah supervision and governance
model, which was introduced in 2008.
The Islamic Banking Department has approved a number of Islamic financial products that can
be offered by Islamic financial institutions in Pakistan. The Department now controls the approval
of new innovative products where any financial institution planning to introduce new Islamic
financial products needs the approval of the Islamic Banking Department. The Department also
dictates the minimum level of education and experience a Shariah advisor would need to qualify
for practice. The banks are expected to inform the State Bank and give the relevant department
details of the Shariah advisor/s they have hired. Finally, the Islamic Banking Department organizes
educational seminars for bank staff and co-ordinates and communicates with Islamic banks to keep
them abreast of the latest developments in the global Islamic financial services sector.
An emergent accounting and reporting scenario

The operations of Islamic banking also had implications for the accounting and reporting prac-
tices of the banks. The unique characteristics of Islamic banking, such as prohibition of riba, and
the features of asset purchase, mark-up, and profit sharing agreements, cannot be reflected in
conventional (Western-economy based) accounting practices. The Accounting and Auditing
Organisation for Islamic Financial Institutions (AAOIFI) has made attempts to establish appro-
priate Islamic standards for accounting and reporting, and these are gradually being incorporated
by the central banks and regulatory bodies in Muslim countries (AAOIFI, 2012). In Pakistan, the

changes to accounting and reporting by Islamic banks have been made to reflect the presence of
the Shariah advisors in the Islamic banks, and the ruling of the Appellate Bench of the Supreme
Court of Pakistan which directed the Institute of Chartered Accountants of Pakistan (ICAP) to
take steps to facilitate the Islamization of the economy (Securities and Exchange Commission of
Pakistan, 2005).
The Shariah advisors report is now mandated as part of the Islamic banks annual financial
reports. This report is similar to the one prepared by auditors, and certifies that the operations of
the bank and the transactions undertaken during the year are in compliance with Shariah principles
(Haniffa and Hudaib, 2007). In instances where a Shariah audit of transactions reveals a discrep-
ancy, the advisors are required to report it as part of their certification and to detail the amount that
was transferred to a charity account to offset the value of the said transaction (Lewis and Algaoud,
2001).
A number of Islamic banks and financial institutions are listed on the Karachi Stock Exchange
(KSE), the countrys largest. The KSE listing regulations impose no additional accountability
requirements in the Companies Ordinance. What regulations the KSE has, mirror the traditional
Western democracy stock exchange listing requirements for commercial companies. The only
Islamic related regulations promulgated by KSE relate to non-banking financial institutions such
as mudaraba companies (Karachi Stock Exchange, 2011).
The preparation of accounting reports for Islamic banks has been identified as an area of priority
for the sector (Hamid et al., 1993; Mirza and Baydoun, 1999; Napier, 2009). The reporting of char-
ity accounts, qard (benevolent loans) and other features of the Islamic financial system distinguish
it from the conventional financial reporting system, and need to be reflected in the accounting and
reporting system followed by these institutions. However, no attempts were made in Pakistan to
address these Islamic issues in accounting. The Supreme Court of Pakistan in its ruling in 1999
directed ICAP to address these concerns which resulted in the constitution of a committee called
The Committee on Accounting and Auditing Standards of Interest-Free Modes of Financing and
Investment.
In 2005, the Committees proposed Islamic Financial Accounting Standards (IFAS-1) for report-
ing of financial transactions in murabaha agreements was approved by the Securities and Exchange
Commission of Pakistan (SECP) (Securities and Exchange Commission of Pakistan, 2005). The
approval meant that all financial institutions were required to produce their reports in line with
IFAS-1. Previously, Islamic banks in Pakistan were accounting for the mark-up based murabaha
transaction as a financing transaction and ignoring the sale and purchase of goods. This practice
arose as a general Islamic banking community convention in advance of the later applicable devel-
opment of accounting standards and regulations. Given that Islamic banking accountability stand-
ards have only recently emerged in rudimentary form, this earlier accounting treatment therefore
grew via informal social and religious customs at the time. Under the new directive, these transac-
tions would be accounted for as a trading agreement between the parties. In May 2007, the SECP
announced the approval of IFAS-2 for reporting of the lease-based ijarah agreement, and financial
institutions were directed to follow these standards when preparing their accounts (Securities and
Exchange Commission of Pakistan, 2007). This standard provided guidelines on the treatment of
the payment made by the lessee for the use of the asset provided by the lessor.7
The State Bank of Pakistan has also committed to gradually adopting the AAOIFIs Shariah
standards for accounting and auditing in Islamic financial institutions. In January 2010, the State
Bank of Pakistan issued a circular which detailed the adoption of four AAOIFI standards: Shariah
Standard No. 3 (relating to default by a debtor), Standard No. 8 (relating to murabaha), Standard
No. 9 (relating to ijarah), and Standard No. 13 (relating to mudaraba). The standards came into

force on 1 July 2010 and mandated that Islamic financial institutions reports follow the AAOIFI
standards (Islamic Banking Department, 2010). These events demonstrate that accountability in
the Islamic banking sector in Pakistan has waxed and waned between focusing on accountability
to religious authorities, government authorities, international financiers, international accounting
regulators, and international Islamic accounting standards (AAOIFI). More recently, the sector in
Pakistan has attempted to accommodate all these stakeholders by requiring Islamic banks to pro-
duce Shariah audit reports parallel to conventional audit reports, and announcing moves to comply
with international accounting standards. Thus, Islamic and conventional commercial accountabil-
ity have advanced, stalled, retreated and resurfaced over time. They now co-exist in parallel,
attempting to simultaneously satisfy different stakeholder groups.
Since the establishment of Meezan Bank, Pakistans first Islamic Bank, in 2002, the number of
institutions offering Islamic banking products has rapidly grown. Islamic banking assets in Pakistan
represent over five per cent of all banking assets in the country (State Bank of Pakistan, 2009). In
2009, Islamic banks in Pakistan commenced consultation on establishing an Islamic interbank
market. The consultation involved settling on a single mechanism for interbank placement between
Islamic banks in Pakistan. The development of this market will further boost the market presence
of the Islamic Banks in Pakistan (New Horizon, 2009). As of January 2010, there were six fully-
fledged Islamic banks (State Bank of Pakistan, 2010) and 13 conventional banks with Islamic
windows operating in Pakistan (State Bank of Pakistan, 2009). Table 1 provides a timeline of the
events in the history of the Islamic banking sector in Pakistan.
This history of Islamic banking and associated regulatory change in Pakistan has more recently
continued within a global environment of change surrounding banking industry accountability and
control in developing, and particularly Islamic, countries such as Pakistan. As Kamla and Roberts
(2010) point out, both modernity and globalization have European ideological and Judeo-Christian
roots that support a discourse suggesting Islamic country adaptation for economic survival and
prosperity. This brings into sharp tension Islamic governments desires for maintaining national
cultures and values while pursuing economic growth and better living standards. Thus, countries
such as Pakistan have experienced the challenges outlined in this article, in attempting to manage
their economy and banking system under the influence of increasing global financial interdepend-
ence between national economies, and thereby seeking solutions such as a dual banking system.
Indeed, Kamla (2009) contends that the dual banking system and Islamic banking generally have
not exhibited characteristics that significantly distinguish them from conventional banks, with
Western commercial banks treating Islamic windows as new commercial business opportunities.
Thus, dual banking systems, such as those operating in Pakistan, arguably represent an accommo-
dation of Islamic principles to global Western banking influences and practices.
In the case of Pakistan, government has nonetheless pursued its own unique banking structure
and regulatory environment in attempting to accommodate both global commercial and Islamic
banking. Such national policy regarding Islamic banking accountability and regulation reflects an
international trend of differentiation between national Islamic banking systems, products and regu-
lation. As Maali and Napier (2009) explain, Islamic banks located in different countries are subject
to different Islamic schools of thought and different regulatory regimes that induce different cor-
porate governance structures, different accountability practices, and different accounting stand-
ards. While Islamic banks in 1990 established a private international regulatory mechanism,
AAOIFI, compliance with its standards is purely voluntary with no enforceable compliance mech-
anisms operative in any country (Karim, 2001; Maali and Napier, 2009).
As reflected in Pakistans experience, Islamic banking regulation therefore remains the prov-
ince of national governments, with governance still being primarily vested in Shariah supervisory

Table 1. Timeline of accounting regulatory developments and Islamic banking in Pakistan
Year Events
1947 Creation of Pakistan
1948 State Bank of Pakistan commences operations as Pakistans Central Bank
1951 Pakistan Institute of Industrial Accountants (PIIA) is established
1952 Pakistan Institute of Accountants (PIA) is formed
1956 Constitution of Pakistan introduced. Pakistan declared an Islamic Republic
1958 The military led by General Ayub Khan seizes power in a bloodless coup
1961 Establishment of the Institute of Chartered Accountants of Pakistan (ICAP)
1962 The Council of Islamic Ideology (CII) is established
1966 Cost and Management Accountants Act passed. PIIA is granted statutory
status
1970 The Securities and Exchange Authority of Pakistan is established; later
renamed as the Corporate Law Authority
1974 Nationalization of the banking sector and establishment of the Pakistan
Banking Council
ICAP and PIIA become associate members of International Accounting
Standards Committee
Pakistan hosts the 2nd Islamic Summit of Muslim nations in Lahore
1975 Dubai Islamic Bank commences operations
1976 PIIA is renamed the Institute of Cost and Management Accountants of
Pakistan (ICMAP)
1979 Government announces schedule of three years for elimination of interest
from the economy
The Federal Shariat Court of Pakistan (FSC) is established
1984 Companies Ordinance is passed
1985 Government admits failure to meet deadline for elimination of interest
from the economy
1991 Privatization and de-nationalization of the Pakistani banking sector
commences
FSC rules many of the banking practices in Pakistan to be against Shariah
requirements
1997 The Pakistan Banking Council is abolished
1999 Restructuring of the Corporate Law Authority is completed and the
Securities and Exchange Commission of Pakistan is established
Government of Pakistan unsuccessfully appeals against the FSC ruling in the
Supreme Court
General Pervez Musharraf deposes the government of Prime Minister
Nawaz Sharif
2002 Meezan Bank, Pakistans first Islamic bank, commences operations
The Supreme Court takes up another review filed by the Government
of Pakistan and the commercial banks. Court rules in favour of the
Government and the ruling of the FSC and the original appeal are declared
void
2003 The State Bank of Pakistan establishes the Islamic Banking Department
2010 Pakistan and adopts four Shariah standards of AAOIFI
Dual banking system continues in Pakistan with six fully-fledged Islamic
banks and many Islamic windows operating in the market

boards. Such national control of Islamic banking may also reflect concerns that international regu-
latory systems such as the AAOIFI may tend towards technical mirroring of Western capitalist
regulatory approaches, thereby risking a shift from religious accountability to bureaucratic account-
ability (Kamla, 2009; Maurer, 2002). Pakistans history of Islamic banking and regulation reflects
a further national strategic dimension that goes beyond accountability and compliance monitoring.
Government banking control and regulation has also acted as a direct and major instigator for the
growth of Islamic financial institutions. This has transpired through the reluctance of the State
Bank of Pakistan to issue licences for the establishment of new conventional banks in Pakistan.
For a period of three years from 2004, only licences for the establishment of Islamic banks were
approved (Qureshi, 2007). Banks offering conventional products could only enter the Pakistani
markets through acquisition of an existing bank or by applying for an Islamic banking licence,
which would exclude their conventional financing operations in the country. Thus the more recent
activities in the Islamic banking sector in Pakistan reveal that while the State does not directly
control the banking sector as much as it did in the past, it still exercises significant indirect control
over how the Islamic banking sector is developed and governed, particularly through its regulatory
policy and activities. Figure 1 illustrates the emergent accountability and governance structure of
the Islamic banking sector in Pakistan.
Accounting practices in Islamic banking in Pakistan are still in their infancy because the sector
itself is still a relatively recent phenomenon. The Islamic banking regulatory developments in the
country only began in 2003. These regulations are limited in scope and allow banks considerable
autonomy and latitude. Islamic accounting standards are even more recent, only surfacing in 2005
when the Supreme Court directed the national accounting bodies to establish relevant standards
that would assist the government in achieving their goal of Islamizing the economy. Hence, we are
witnessing an emergence of accountability processes that are attempting to reconcile international
commercial requirements with national religious priorities. This emergence of accounting and
accountability practices is still in its very nascent stage.
The privatization and de-nationalization of the banking sector meant that the State transferred
operational responsibilities to private enterprises. While at first sight the evolution of the Islamic
banking sector in Pakistan would appear to be managed by the banks, the decision of the State
Bank of Pakistan to only issue Islamic banking licenses indicates that the State still controls the
growth of the Islamic banking sector, and the shape and accountability of Pakistans banking
Islamic Financial
Instuons
Islamic Banking
Department,
State Bank of
Pakistan
State Bank
of Pakistan
Convenonal
Banks
Figure 1. Accountability relationships in the Pakistan Banking Sector

sector generally. While the State no longer exercises direct control over the management of
the banks, it still controls the environment in which the banks operate and their ultimate
accountabilities.
From Economic Theory of the State and Islamic theocracy perspectives, we therefore can iden-
tify an underlying change in the balance of the government agenda and regulatory policy from the
1970s to the present day. While Islamic banking is on the rise, the underlying rationales have argu-
ably changed. Whereas the 1970s1980s policy of Islamizing the Pakistan economy reflected a
focus on promoting Islamic principles, the history of less than successful change implementation
brought economic management priorities back to the fore. Thus, recent history in the Pakistan
banking sector has seen government intervention that aimed at an accommodation between both
economic and Islamic agendas, with the Economic Theory of the State and Islamic theocracy both
impacting on banking industry structure, accountability and regulation.
Conclusion
The analysis of the historical events that have shaped the Pakistani Islamic banking sector illus-
trates the critical and at times problematic tasks of planning and implementing banking accounta-
bility and regulatory systems and structures. It brings into sharp relief the complexities of managing
the demands of multiple stakeholder groups, including government, religious authorities, the
accounting profession, international financiers, and global regulatory and accounting standards
authorities. This is illustrated by the difficulty Pakistan faced in establishing a new banking system
when the relevant financial institutions were not given the opportunity and time to recommend the
way changes could have been made to the conventional financing system to comply with Shariah
requirements. This lack of communication led to the introduction of financial products such as
murabaha, which were seen by some jurists as an attempt to legitimize interest-based activities
under an Islamic system.
The nationalization of the banking sector and the subsequent deadlines set by the government for
the Islamization of the economy were ambitious and were the cause of operational and accountabil-
ity uncertainty among the financial institutions, as well as among customers and foreign investors.
This uncertainty led to a situation where a dual system of banking (conventional and Islamic) con-
tinued to operate. The Pakistani experience also highlights the role of both State and Islamic ideol-
ogy in the financial governance and decision-making of the State. The Economic Theory of the State
anticipates State intervention to ensure that the benefits of private goods are equitably distributed in
the community. In the case of Pakistan, the government intervened to nationalize the banking sector
to ensure that the profits were distributed in the community. The State also introduced legislation to
implement and promote the Islamization of the economy. As discussed earlier, the effective intro-
duction and implementation of Islamic banking principles in Pakistan required cooperation between
the government, the religious bodies, and the private banking sector. However, in this case, the
Government of Pakistan did not consult the banks, instead summarily nationalizing them and intro-
ducing Islamic banking principles on the basis of the recommendations of the CII.
This brings into question the motivation and planning for the introduction of Islamic banking
and its accountabilities in Pakistan. As discussed in this article, the demand for an independent
Pakistan was made on the basis of creating a homeland for the Muslims of South Asia. Pakistans
decision to become an Islamic Republic soon after independence further enforced the belief of
many religious scholars and religious political parties that Pakistan would become a true Muslim
State with the khilafat form of government where the State would act as the khalifah or trustee of
Gods possessions and would, thereby be ultimately accountable to God. However, Pakistan

continues to follow a Westminster-style Western parliamentary system where the leaders are
elected through democratic elections. In this context, nonetheless, the State of Pakistan is expected
to meet the expectations of the section of the population that wants the country to be governed
according to Shariah.
Pakistani military rulers have ruled Pakistan for the majority of its years since independence. It
was during these periods that religious issues and religious political parties gained prominence.
This is partly due to the military rulers need for legitimization of their military rule, which usually
came through support from the religious-based political parties (Cohen, 2002; Hashmi, 2009). This
suggests that the decision to introduce Islamic banking in Pakistan was not just an economic deci-
sion, but also had political implications for the Government of Pakistan.
The introduction of Islamic banking in Pakistan was undertaken without appropriate consulta-
tion with and accountability to the relevant institutional stakeholders. While the Council of Islamic
Ideology (CII) was tasked with reporting on the process for the introduction of Islamic banking,
organizations such as ICAP, and the financial institutions themselves, were not consulted. The
nationalization of the banking industry had brought the banking institutions under the control of
the government. Therefore, these institutions did not protest when, in 1979, the government made
the decision to Islamize the entire economy within three years. This ambitious timeline was not
met and institutions such as ICAP did not play any role in the subsequent attempts made by the
government to develop regulations for the sector. This fact was recognized by the courts, which
asked ICAP to be involved in the Islamization of the economy. The involvement of these institu-
tions has resulted in the creation of new accounting regulations, namely IFAS 1 and 2, and the
adoption of AAOIFI Shariah Standards. Thus, over time, once the governments banking
Islamization agenda was in play, we see a belated and only recent involvement of the accounting
profession in the invocation of accounting standards and related regulation.
Perhaps the greatest import of the Pakistani experience is the significance of a central control
body. The State Bank of Pakistan lost some of its regulatory powers due to the formation of the
Pakistan Banking Council in the 1970s. The lack of outright authority made it difficult for the
State Bank to control and streamline the activities of the banks. The abolition of the Pakistan
Banking Council and the subsequent formation of the Islamic Banking Department in the State
Bank of Pakistan helped return regulatory control to government and thereby standardize the
requirements for Islamic banking in the country and the activities of the banks. Since then,
Islamic banking has flourished in Pakistan and is expected to become the main source of public
sector financing in the future.
This history reveals key underpinning accountability and regulatory strategies. We see the wax-
ing and waning of direct and indirect government control and regulation of its banking system,
attempting to balance national economic management in a global financial system with theocratic
religious principles enacted through banking products, practices and governance. The require-
ments of these competing agendas produced a drive towards, and subsequent retreat from theo-
cratic direct control of banking in favour of a dual commercial and Islamic banking system. This
also produced competition between government, religious and commercial approaches to banking
accountability and regulation, in which ultimately government economic management and com-
mercial banking imperatives held sway.
More recently, an emergent influence of global accounting standards upon general accounting
and audit practice in Pakistan is becoming evident, doubtless prompted by the Governments ongo-
ing need to balance the national economic needs for international trade, credit and financing with
its own ongoing commitment to an internal Islamic banking system. This is best illustrated by the
more recent adoption of both IFAS 1 and 2 and AAOIFI Shariah accounting standards. How the

implementation of accounting and audit standards from both international economic and national
theocratic sources will play out in terms of Pakistans future banking accountability and regulation
still remains to be seen. Our evidence reveals the continuing presence and importance of religious
reporting, audit, and accountability systems for satisfying religious stakeholder groups.
This historical analysis reveals banking regulation and accountability relationships in Pakistan
to be contextually laden, both from economic and religious perspectives, as well as from global and
national perspectives. Banking regulation and accountability emerge as crucial determinants and
developers of the structure and processes of the entire banking sector, in addition to setting account-
ability and control relationships within the sector. Thus, accountability and regulatory mechanisms
in Pakistan are multifunctional, contributing directly to banking industry expansion as well as
offering pathways for the industrys religious and financial monitoring and control. This is argua-
bly both an historical and contemporary setting for banking regulation and accountability in which
a national banking industry finds itself simultaneously accountable to national and international
economic influences as well as Islamic agendas. Hence, any apparent contemporary move from
religious to bureaucratic commercial accountability is likely to be a mirage. In fact, our evidence
points to their co-existence and mutual reinforcement.
Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit
sectors.
Notes
1. The application of Shariah laws in Saudi Arabia and Iran vary due to the differences in interpretation
based on the Sunni and Shia traditions.
2. In Islamic economics, money is treated as a medium of exchange and has no intrinsic value. Therefore,
Islamic banks invest in assets as compared to conventional financing where money is lent.
3. 2010 estimate.
4. General Ayub Khan ruled Pakistan from 1958 to 1969. General Yahya Khan was in power during 1969
1971. General Zia-ul-Haq enforced martial law and ruled from 1977 to 1988. General Pervez Musharaff
was the leader of Pakistan from 1999 to 2007 (he stepped down as the army chief in 2007 but continued
to serve as President of Pakistan until 2008).
5. In 1976, the PIIA was renamed as the Institute of Cost and Management Accountants of Pakistan
(ICMAP).
6. The Department of the Auditor General of Pakistan is responsible for ensuring public accountability and
fiscal transparency in governmental operations.
7. IFAS-2 dictates that the payment for hiring the assets is treated as an expense for the lessee. The lessor
is required to show the asset as distinct from other assets that are used by the lessor his/herself.
References
AAOIFI (2012) Overview: Accounting and Auditing Organisation for Islamic Financial Institutions
homepage. Available at: http://www.aaoifi.com/aaoifi/TheOrganization/Overview/tabid/62/language/
en-US/Default.aspx (accessed 8 April 2012).
Acharya A (2007) State sovereignty after 9/11: Disorganised hypocrisy. Political Studies 55(2): 274296.
Aggarwal RL and Yousef T (2000) Islamic banking and investment financing. Journal of Money, Credit, and
Banking 32(1): 93120.
Ahmed AS (1997) Jinnah, Pakistan, and Islamic Identity: The Search for Saladin. London: Routledge.
Alexander D and Servalli S (2010) The state and/of accounting regulation. The 6th Accounting History Inter-
national Conference, 1820 August, Wellington.

Ali T (2005) The Leopard and the Fox: A Pakistani Tragedy. London: Seagull Books.
Altman M (2006) The state and economic efficiency: A behavioral approach. In: Pressman S (ed.) Alternative
Theories of the State. Hampshire: Palgrave Macmillan, pp.164190.
Amuzegar J (1997) Irans Economy under the Islamic Republic. New York: I.B. Tauris & Co. Ltd.
Ashraf J and Ghani WI (2005a) Accounting development in Pakistan. The International Journal of Account-
ing 40(2): 175201.
Ashraf J and Ghani WI (2005b) Accounting in a country: The case of Pakistan. Centre for Management and
Economic Research (CMER) Working Paper No. 0540. Lahore University of Management Sciences.
Atkinson RF (1978) Knowledge and Explanation in History: An Introduction to the Philosophy. London:
Macmillan Press.
Auditor General of Pakistan (2011) Towards international standardization. Available at: http://www.agp.gov.
pk/int-activits2.html (accessed 10 March 2011).
Ayub MN (2002) Islamic Banking and Finance: Theory and Practice. Karachi: State Bank of Pakistan Press.
Bartocci L and Lucentini D (2010) The evolution of state paradigms and accounting language from the past
to the present day: An analysis of possible correlations in the light of the Italian Experience. The 6th
Accounting History International Conference, 1820 August, Wellington.
Barzel Y (2002) A Theory of the State: Economic Rights, Legal Rights, and the Scope of the State. Cambridge:
Cambridge University Press.
Barzun J and Graff HF (1985) The Modern Researcher. New York: Harcourt Brace Jovanovich.
Baumol WJ (1965) Welfare Economics and the Theory of the State. London: Bell.
Bedeian AG (1998) Exploring the past. Journal of Management History 4(1): 415.
Bluntschli JK (1885) The Theory of the State. Oxford: Clarendon Press.
British Broadcasting Corporation News (1999) Pakistan court upholds Islamic banking. Available at: http://
news.bbc.co.uk/2/hi/south_asia/576435.stm (accessed 30 March 2010).
Buchanan JM (1975) The Limits of Liberty: Between Anarchy and Leviathan. Chicago: University of Chicago
Press.
Butterfield H (2009) The Underlying Assumption. In: Budd A (ed.) The Modern Historiography Reader:
Western Sources. London: Routledge, pp.190194.
Carnegie GD and Napier CJ (1996) Critical and interpretive histories: Insights into accountings present and
future through its past. Accounting, Auditing & Accountability Journal 9(3): 739.
Carnegie, GD and Napier, CJ (2012) Accountings past, present and future: the unifying power of history.
Accounting, Auditing & Accountability Journal 25(2): 328369.
Carver T (1982) Marxs Social Theory. Oxford: Oxford University Press.
Choudhury GW (1956) The Constitution of Pakistan. Pacific Affairs 29(3): 243252.
Choudhury MA and Hussain M (2005) A paradigm of Islamic money and banking. International Journal of
Social Economics 32(3): 203217.
Cohen SP (2002) The nation and the state of Pakistan. The Washington Quarterly 25(3): 109122.
Constitution of Pakistan (2010) The Constitution of the Islamic Republic of Pakistan. Available at: http://
www.pakistani.org/pakistan/constitution/ (accessed 20 September 2010).
Council of Islamic Ideology (1980) Report on the Elimination of Interest from the Economy 1980. Islamabad:
Council of Islamic Ideology.
Das RJ (2006) Marxist theories of the state. In: Pressman S (ed.) Alternative Theories of the State. Hampshire:
Palgrave Macmillan, pp.6490.
Davidson C and Harris J (2006) Globalisation, theocracy and the new fascism: The US rights rise to power.
Race & Class 47(3): 4767.
Deloitte Global Services Limited (2010) IASPlus: Accounting Standards Updates by Jurisdiction: Pakistan.
Available at: http://www.iasplus.com/country/pakistan.htm (accessed 10 March 2011).
Delorme R (1984) A new view on the economic theory of the state: A case study of France. Journal of Eco-
nomic Issues 18(3): 715744.
Djojosugito R (2008) Mitigating legal risk in Islamic banking operations. Humanomics 24(2): 110121.

Dubai International Financial Centre (2010) Islamic finance set to be $2 trillion industry globally within five
years. International Financial Centre Press Release. 24 May, Dubai, United Arab Emirates.
Dubai Islamic Bank (2010) About DIB. Available at: http://www.dib.ae/AboutUs/overview (accessed 11
January 2010).
Duncan G (1982) The Marxist theory of the state. Royal Institute of Philosophy Lecture Series 14: 129143.
Elton GR (1967) The Practice of History. Glasgow: Collins, Fontana.
Federal Shariat Court (1991) Judgement on Riba (Interest). Cabinet Report Document 1991. Islamabad: Gov-
ernment of Pakistan.
Fleischman RK, Kalbers LP and Parker LD (1996a) Expanding the dialogue: Industrial revolution costing
historiography. Critical Perspectives on Accounting 7(3): 315337.
Fleischman RK, Mills PA and Tyson TN (1996b) A theoretical primer for evaluating and conducting histori-
cal research in accounting. Accounting History 1(1): 5575.
Funnell W (1996) Preserving history in accounting: Seeking common ground between new and old
accounting history. Accounting, Auditing & Accountability Journal 9(4): 3864.
Funnell W (1998) The narrative and its place in the new accounting history: The rise of the counternarrative.
Gafoor ALM (1996) Interest-Free Commercial Banking. Malaysia: A.S.Noordeen.
Guthrie JE and Parker LD (1999) A quarter of a century of performance auditing in the Australian federal
public sector: A malleable masque. Abacus 35(3): 302332.
Hamid S, Craig R and Clarke F (1993) Religion: A confounding cultural element in the international harmo-
nization of accounting? Abacus 29(2): 131148.
Haniffa R and Hudaib M (2007) Exploring the ethical identity of Islamic banks via communication in annual
reports. Journal of Business Ethics 76(1): 97116.
Hardin R (1997) Economic theories of the state. In: Mueller DC (ed.) Perspectives on Public Choice: A Hand-
book. Cambridge: Cambridge University Press, pp.2134.
Hashmi AS (2009) Terrorism, religious radicalism and violence: Perspectives from Pakistan. Institute of
Peace and Conflict Studies Issue Brief 121, September.
Hassan MK and Lewis MK (2007) Islamic finance: A system at the crossroads? Thunderbird International
Business Review 49(2): 151160.
Heller A (1982) A Theory of History. London, Boston & Henley: Routledge & Keegan Paul.
Hull BB and Bold F (1989) Towards an economic theory of the church. International Journal of Social Eco-
nomics 16(7): 515.
Institute of Chartered Accountants of Pakistan (2011) About ICAP. Available at: http://www.icap.org.pk/
web/links/0/abouticap.php (accessed 10 March 2011).
Institute of Cost & Management Accountants of Pakistan (2011) About us. Available at: http://www.icmap.
com.pk/about_us.aspx (accessed 7 March 2011).
International Federation of Accountants (2010) Action Plan Developed by Institute of Chartered Accountants
of Pakistan (ICAP). New York.
International Financial Reporting Standards (2011) About us. Available at: http://www.ifrs.org. (accessed 24
February 2011).
International Monetary Fund (2005) Pakistan Financial Sector Assessment Program Technical Note
Condition of the Banking System. IMF Country Report No. 05/157, May. Washington D.C.
Islamic Banking Department (2010) Adoption of Shariah standards issued by Accounting and Auditing Orga-
nization for Islamic Financial Institutions (AAOIFI). IBD Circular No. 01/2010. Karachi: State Bank of
Pakistan.
Jessop R (1987) Economic Theory of the State. In: Eatwell J, Milgate M and Newman P (eds) The New Pal-
grave Dictionary of Economics. Palgrave Macmillan.
Kamla R (2009) Critical insights into contemporary Islamic accounting. Critical Perspectives on Accounting
20(8): 921932.
Kamla R and Roberts C (2010) The global and the local: Arabian Gulf states and imagery in annual reports.

Kamla R, Gallhofer S and Haslam J (2006) Islam, nature and accounting: Islamic principles and the notion of
accounting for the environment. Accounting Forum 30(3): 245265.
Kamran T (2008) Democracy and Governance in Pakistan. Lahore: South Asia Partnership-Pakistan.
Karachi Stock Exchange (2011) The Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited.
22 July, Karachi.
Karim J (2008) Polarization of Political Culture: Islam and Pakistan, 19581988. Germany: VDM Verlag.
Karim RAA (2001) International accounting harmonization, banking regulation and Islamic banks. The Inter-
national Journal of Accounting 36(2): 169193.
Kasolowsky R (2009) Bankers eye Islamic finance jobs as crisis hits. Reuters, 16 April.
Khan MM (2008) Main features of the interest-free banking movement in Pakistan (19802006). Managerial
Finance 34(9): 660674.
Khan MM and Bhatti MI (2006) Why interest-free banking and finance movement failed in Pakistan. Huma-
nomics 22(3): 145161.
Khan MS and Mirakhor A (1990) Islamic banking: Experiences in the Islamic Republic of Iran and in Paki-
stan. Economic Development and Cultural Change 38(2): 353375.
Krader L (1968) The Formation of the State. Englewood Cliff, NJ: Prentice Hall.
Lee D (1974) Plato: The Republic. New York: Penguin Books.
Leff G (1971) History and Social Theory. Garden City, NY: Anchor Books, Doubleday & Co. Inc.
Lemarchand Y (2010) Accounting, the state and democracy: A long term perspective on the French experi-
ment 17161967. 22nd Accounting, Business & Financial History Annual Conference, September 2010,
Cardiff Business School.
Lewis MK and Algaoud LM (2001) Islamic Banking. Cheltenham, UK: Edward Elgar.
Maali B, Casson P and Napier C (2006) Social reporting by Islamic banks. Abacus 42(2): 266289.
Maali B and Napier C (2009) The two faces of Islamic accounting. Working Paper, also presented at 5th Asia-
Pacific Interdisciplinary Research in Accounting Conference. Auckland, New Zealand, 2007.
Maurer B (2002) Anthropological and accounting knowledge in Islamic banking and finance: Rethinking
critical accounts. Journal of the Royal Anthropological Institute 8(4): 645667.
Mehmood A (2002) Islamisation of economy in Pakistan: Past, present and future. Islamic Studies 41(4):
675704.
Merino BD (1998) Critical theory and accounting history: Challenges and opportunities. Critical Perspectives
on Accounting 9(6): 603616.
Merino BD and Mayper AG (1993) Accounting history and empirical research. Accounting Historians Jour-
nal 20(2): 237267.
Miller P (1990) On the interrelations between accounting and the state. Accounting, Organizations and Soci-
ety 15(4): 315338.
Mirza M and Baydoun N (1999) Do Islamic societies need their own accounting and reporting standards?
Journal of Academy of Business Administration 2(2): 3945.
Murdoch G (2009) Timeline: Milestones in rise of Islamic finance. Reuters, 13 April.
Mutalib H (1993) Islam in Malaysia: From Revivalism to Islamic State. Singapore: Singapore University
Press.
Napier C (2009) Defining Islamic accounting: Current issues, past roots. Accounting History 14(12): 121144.
Narayan F and Godden T (2000) Financial Management and Governance Issues in Pakistan. Manila: Asian
Development Bank.
Narayan F, Godden T and Reid B, et al. (2000) Financial Management and Governance Issues in Selected
Developing Member Countries: A Study of Cambodia, Peoples Republic of China, Mongolia, Pakistan,
Papua New Guinea, Uzbekistan, and Viet Nam. Manila: Asian Development Bank.
New Horizon (2009) Pakistans Islamic banks look to kick-start interbank market. Available at: http://www.newho-
rizon-islamicbanking.com/index.cfm?section=news&action=view&id=10814 (accessed 13 January 2010).
Noman O (1988) The Political Economy of Pakistan 194785. London: KPI Limited.
Oldroyd D (1999) Historiography, causality, and positioning: An unsystematic view of accounting history.
Accounting Historians Journal 26(1): 83102.

Olson M (2000) Power and Prosperity: Outgrowing Communist and Capitalist Dictatorship. New York:
Basic Books.
Parker LD (1997) Informing historical research in accounting and management: Traditions, philosophies, and
opportunities. Accounting Historians Journal 24(2): 111149.
Parker LD (1999) Historiography for the new millennium: Adventures in accounting and management.
Accounting History 4(2): 1142.
Parker LD (2004) Presenting the Past: Perspectives on Time for Accounting and Management History.
Accounting, Business & Financial History 14(1): 127.
Pew Research Centre (2009) Mapping the Global Muslim Population. Washington: Pew Forum on Religion
& Public Life.
Phillips K (2006) American Theocracy: The Perils and Politics of Radical Religion, Oil, and Borrowed
Money in the 21st Century. London: Penguin.
Philpott D (2002) The challenges of September 11 to secularism in International Relations. World Politics
55(1): 6695.
Population Reference Bureau (2010) World Population Data Sheet. Washington, DC: United States Agency
for International Development.
Porter DH (1981) The Emergence of the Past. Chicago: University of Chicago Press.
Previts GJ, Parker LD and Coffman EN (1990) Accounting history: Definition and relevance. Abacus 26(1):
115.
Qureshi S (2007) The banks new clothes. Newsline, Pakistan.
Rammal HG (2008) Political motivations: The nationalization of the Pakistani banking sector. Corporate
Ownership and Control Journal 6(2): 342346.
Rizvi H-A (1983) Pakistan: Ideology and foreign policy. Asian Affairs 10(1): 4859.
Saeed KA (1999) Accounting profession and its development in Pakistan. Pakistan and Gulf Economist 33.
Securities and Exchange Commission of Pakistan (2005) SEC notifies new Islamic Financial Accounting
Standards. Press Release, 6 September. Islamabad: Government of Pakistan.
Securities and Exchange Commission of Pakistan (2007) Notification. Statutory Notification SRO
431(1)/2007, 22 May. Islamabad: Government of Pakistan.
Securities and Exchange Commission of Pakistan (2010) The Chartered Accountants Ordinance 1961. Avail-
able at: http://www.secp.gov.pk/corporatelaws/pdf/CharteredAccountantsOrdinance1961.pdf (accessed
16 December 2010).
Securities and Exchange Commission of Pakistan (2011) About SECP. Available at: http://www.secp.gov.
pk/ (accessed 10 March 2011).
Siddiqui MN (1987) Partnership and Profit-Sharing in Islamic Law. Leicester: The Islamic Foundation.
Southgate B (1996) History: What and Why? Ancient, Modern and Postmodern Perspectives. London: Rout-
ledge.
Stanford M (1986) The Nature of Historical Knowledge. Oxford: Basil Blackwell.
Stanford M (1998) An Introduction to the Philosophy of History. Massachusetts: Blackwell.
State Bank of Pakistan (2003) Strategic Plan for Islamic Banking Industry of Pakistan. Karachi.
State Bank of Pakistan (2008) Islamic Banking Department. Available at: http://www.sbp.org.pk/ibd/
(accessed 20 October 2008).
State Bank of Pakistan (2009) Islamic Banking Bulletin. Islamic Banking Department IV(3).
State Bank of Pakistan (2010) Islamic Banking Department. Available at: http://www.sbp.org.pk/ibd/
(accessed 10 January 2010).
Supreme Court of Pakistan (1999) Judgement on Riba: In Cabinet Report Document 1999. Islamabad: Gov-
ernment of Pakistan.
Supreme Court of Pakistan (2002) Civil Shariat Review Petition No. 1 of 2000. Islamabad: Shariat Appellate
Bench of Supreme Court.
Tamadonfar M (2001) Islam, law and political control in contemporary Iran. Journal for the Scientific Study
of Religion 40(2): 205219.
Tholfsen TR (1967) Historical Thinking: An Introduction. New York: Harper & Row.

Tinker A (1984) Theories of the state and the state of accounting: Economic reductionism and political volun-
tarism in accounting regulation theory. Journal of Accounting and Public Policy 3(1): 5574.
Tosh J and Lang S (2002) The Pursuit of History: Aims, Methods and New Directions in the Study of Modern
History. Edinburgh Gate, Harlow: Pearson Education Ltd.
Usmani MT (1998) An Introduction to Islamic Finance. Karachi: Idaratul Maarif.
Vincent A (1987) Theories of the State. Oxford: Basil Blackwell Ltd.
Von Humboldt W (2009) On the historians task (originally published in 1822). In: Budd A (ed.) The Modern
Historiography Reader: Western Sources. London: Routledge, pp.168171.
Warde I (2000) Islamic Finance in the Global Economy. Edinburgh: Edinburgh University Press.
Webber KJ (1997) The economic future of Afghan women: The interaction between Islamic law and Muslim
culture. University of Pennsylvania Journal of International Economic Law 18(3): 10491084.
White M (1965) Foundations of Historical Knowledge. New York: Harper and Row.
Whynes DK and Bowles RA (1981) The Economic Theory of the State. Oxford: Martin Robertson.
World Bank (2007) Pakistan Public Sector Accounting and Auditing: A Comparison to International Stan-
dards. A Joint report by the South Asia Region Financial Management Unit of the World Bank and the
Government of Pakistan. Report No. 39699-PK.
World Bank (2011) Second improvement to Financial Reporting and Auditing Project. Available at: http://
web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&men
uPK=228424&Projectid=P076872 (accessed 3 March 2011).

Accounting History 2013 Rammal 5 29

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Accounting History 2013 Rammal 5 29

Загружено:

Авторское право:

Доступные форматы

463269

Article Accounting History

Islamic banking in Pakistan: 18(1) 529

accountability and regulation

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Economic Theory of the State

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Accountability in Islamic finance

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Accounting regulatory developments in Pakistan

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Accountability in Islamic banks in Pakistan

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

The dual system of finance and accountability

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

An emergent accounting and reporting scenario

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Table 1. Timeline of accounting regulatory developments and Islamic banking in Pakistan

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Figure 1. Accountability relationships in the Pakistan Banking Sector

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Downloaded from ach.sagepub.com at Universitas Gadjah Mada on December 7, 2016

Вам также может понравиться