The State Bank of Pakistan has made a five-year policy that would strengthen the regulation of Islamic banking in Pakistan and help increase its market share from present 4.5 percent to 12 percent by 2012; the new plan would be announced by the end of this month, said Pervez Said, Director Islamic Banking Department of SBP.

He was speaking at the Second International Conference on Islamic Banking and Finance held here on Monday, which was organised by the Al Huda Centre for Islamic Banking and Economics. Both local and international bankers participated in the conference. Punjab Finance and Planning and Development Minister Tanvir Ashraf Kaira was the chief guest.

Pervez said that under the new policy the SBP would also broaden the horizon of Islamic banking by focusing on agriculture, SMEs and micro finance. He elaborated that like five pillars of Islam, the policy also has five pillars on which the SBP would focus on and ensure its implementation. “The policy would focus on evolving a regulatory framework, enhancing the spectrum of Islamic banking and strengthening Shariah compliance mechanism. Also, internal and external stakeholders would be consulted for better liaison and special focus would be made on strengthening human resources,” he added.

According to him, that Pakistan has made tremendous progress in Islamic banking over the last five years. In 2003, the market share of Islamic banking was only 0.5 percent, and only one full fledge bank and one branch of a conventional bank were operating then in Pakistan. After five years, the deposit of Islamic banks stands at Rs 160 billion, which is 4.5 percent of market share. At present, there are six full fledge banks with 230 branches and 12 conventional banks having 103 Islamic branches operating in Pakistan.

He observed that progress of the Islamic banking in Pakistan is very positive as compare to other countries; Indonesian Islamic banks could grasp only 1.5 percent market share in more than 10 years while Malaysian Islamic banks could accumulate 12 percent in more than 20 years. He was of the view that there is a lot of potential for setting up educational institutes for training the Islamic bankers and we have to be patient in developing Islamic banking.

Punjab Finance Minister Tanvir Ashraf Kaira said foreign investors of Middle East, Far East and UK have shown keen interest in establishment of Islamic banks in Pakistan. He told the audience that total assets of Islamic banks are Rs 135 billion and there are 170 branches of 6 licensed full fledged Islamic banks and more than 13 commercial banks are working in Islamic banking.

According to him, it is very encouraging that Islamic finance is being practised by Muslim as well as few non-Muslim countries, and the United Kingdom has taken significant initiatives in the development of Islamic finance by adopting an open door policy. He also said the Punjab government is committed to continue promoting Islamic financing in the province keeping in view its linkages with global economy and existing commitments to local and foreign investors.

“Islamic banking and finance is a system based on strong economic, financial and social considerations, envisaging equitable distribution of rewards and risks among the stakeholders. It is need of the hour to promote Islamic banking and financing in the country,” he added.

Shafqat Ahmad, Country Head Al Baraka Bank, said Islamic banking provides solution to all economic crises being faced by the world. He also said there is a need to develop a comprehensive strategy for encouraging the banking system. He also said the Islamic banking has a great potential in the world, at present its global total assets runs in to billion of dollars and is growing day by day. “However, Islamic banking faces many challenges, including limited human resource, lack of product innovation, liquidity management, uniform Shariah standards and low awareness on Islamic banking both in Pakistan and in the world. These challenges need to be addressed,” he added.
Haroon Khawaja, Chairman Chief Minister Monitoring and Implementation Cell, Hasan Bilgrami, CEO BankIslami, Nikolaus Schwarz, CEO Dawood Islamic Bank, Jamil Akhtar Khan, CEO Takaful Pakistan Limited, Waqaruddin, CEO Pak Qatar General Takaful Limited, Muhammad Akram Lal Din, Director Islamic Research Academy Malaysia, Muhammad Yahya, Head of Operations Doha Qatar Bank, P Ahmed, CEO Pak Qatar Family Takaful, Amir Khali-ur-Rehman, Head of Corporate Islamic Banking, Askari Bank, and Justice Khalil-ur-Rehman also addressed the conference. Earlier, the Finance Minister inaugurated the Islamic Banking exhibition.