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Banks must collectively broaden Pakistan remittance initiative; keeping stable exchange rate useful

Interview with Mr Irfan Siddiqui — President and CEO, Meezan Bank

Profile:

Mr Irfan Siddiqui is the founding President and Chief Executive Officer of Meezan Bank. His educational background includes a Foundation Course in Accountancy from Sunderland, UK and he is a Fellow Chartered Accountant from Institute of Chartered Accountants England and Wales. He has served at a number of senior management positions including Chief Executive Officer at Al-Meezan Investment Bank Limited, as a General Manager at Pakistan Kuwait Investment Company, Manager Finance and Operation at Abu Dhabi Investment Company and Senior Business Analyst at Exxon Chemical (Pakistan) Ltd. In 2002, Al-Meezan Investment Bank stepped into the domain of Islamic commercial banking through the acquisition of Pakistan operations of Societe Generale and was issued first Islamic commercial banking license. Al-Meezan was thus renamed as Meezan Bank. Meezan Bank was born as Pakistan’s first Islamic bank offering products and services in line with the principle of Shariah. Since that day, Meezan Bank has been the fastest growing bank in the history of Pakistan’s banking industry, averaging a deposit growth of 32% per annum over the last ten years. As we developed over the years, we brought new and innovative Riba-free products and solutions in an industry that was solely based on interest. Meezan Bank, however, took up the challenge and through our determination, perseverance and team of well-rounded members, managed to emerge as Pakistan’s premier and largest Islamic bank offering Islamic banking products that are at par with conventional offerings in the country. With over 570 branches in more than 145 cities across Pakistan, Meezan Bank is the 8th largest bank (in terms of Branch Network) in Pakistan. This milestone illustrates the success story of Meezan Bank while also highlighting how Islamic banking is successfully attracting more customers and gaining larger market shares and revenues in the intensely competitive environment of Pakistan’s banking sector. All branches of Meezan Bank offer a comprehensive and broad range of Islamic financial products as well as real-time online banking facilities to customers.

PAGE: YOUR VIEWS ON THE ROLE OF EXCHANGE COMPANIES AND BANKS REGARDING REMITTANCES IN PAKISTAN:
IRFAN SIDDIQUI: As you are aware, the Pakistan Remittance Initiative (PRI) is a joint initiative taken up by the State Bank of Pakistan, Ministry of Finance and the Ministry of Overseas Pakistanis since 2009 to facilitate the inflow of home remittances in Pakistan. The State Bank vets exchange companies which are allowed to send home remittances through PRI banks in Pakistan. Here, when I use the term “exchange companies”, I mean the Money Service Bureaus (MSBs) that are stationed abroad and take foreign currency from Pakistanis and remit them to Pakistan. Major exchange companies like Western Union, Money Gram, and Ria Financial are now household names here, thanks to the projection that is being given to them and other MSBs by banks present here. For the fiscal year 2017 (July-June), home remittances number has already touched US$15.5 billion. As this is not only a bread and butter business for banks but also a positive improvement in favor of national interest, banks should collectively sponsor such initiatives on a regular basis.

PAGE: YOUR TAKE ON THE RUPEE-DOLLAR PARITY:
IRFAN SIDDIQUI: The present government has done a commendable job with regard to keeping the USD/PKR parity stable for last 2 years, with the exchange rate hovering between 104.75 and 105 at the moment. The biggest buyer of foreign currency in the country is the government itself, on account of purchase of crude oil and the retirement of international debt. Stable dollar-rupee parity does discourage export proceeds, but then, when have exports increased whenever PKR has been devalued? Moreover, devaluing your currency increases the cost of imports and since we are an import skewed economy, it triggers inflation. Hence, the current strategy of keeping the exchange rate stable has been beneficial for the masses in Pakistan.

 

PAGE: YOUR VIEWS ON THE AVAILABILITY OF DOLLARS AND THE POLICY OF THE STATE BANK OF PAKISTAN:
IRFAN SIDDIQUI: Dollars are available in the market for legible transactions. Whether you need foreign currency for education or medical purpose or for trade or outward remittances, dollars are available in adequate supply in the inter-bank market. The State Bank of Pakistan is doing a commendable job by providing dollar liquidity to those banks that have sizeable remittances and payments to ensure its smooth execution without moving the exchange rate. Moreover, the policy of keeping a stable exchange rate has ensured that exporters are consistently selling dollars in the forward market to lock in the forward premiums and avail more proceeds in PKR for their foreign currency.

PAGE: YOUR VIEWS ON DEPRECIATION OF RUPEE OVER THE PERIOD OF LAST 7 YEARS:
IRFAN SIDDIQUI: Over the last 7 years, the Pak Rupee has devalued about 24%, i.e. approx. 3.5% per year. It was near 84 rupees to a dollar in 2010 and currently hovers near 105. I believe the rupee is correctly valued at the moment and that the market should continue to be regulated to ensure that speculators do not take unfair advantage and cause economic damage to the country.

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