Under the framework of Shariah-compliant, Pakistan’s Islamic financial market has been trying its major role to regulate the full resources in a proper way and keep well-organized allocation on the basis of Islamic modes and intensifying the payments systems to contribute considerably to economic growth of Pakistan.
Under growing role of Islamic financing in Pakistan, the State Bank of Pakistan (SBP) has implemented various Islamic financing measures to meet the requirements of banks conducting operations under Islamic modes and offering them best conducive environment.
During October-December 2016, SBP recorded that the network of Islamic Banking Industry (IBI) comprised of 21 IBIs (Islamic Banking Institutions); 5 full-fledged IBs (Islamic banks) and 16 conventional banks having standalone IBBs (Islamic banking branches). Furthermore, the branch network of IBI stood to 2,322 branches during the period under review. Furthermore, return on equity (ROE) and return on assets (ROA) were recorded at 10.6 percent and 0.7 percent, respectively.
Takaful (Islamic insurance) is an exclusive and wide model of protection. Its competitiveness is reflected by the fact that almost all insurance companies in Pakistan have now created their Takaful divisions and windows to offer Shariah-compliant services to their consumers. Currently, Malaysia, Saudi Arabia and the nations of Gulf Cooperation Council (GCC) are the states where Takaful has the greatest prevalence, while, as of late, its popularity grows in other states like Pakistan, Indonesia, Jordan and Nigeria.
According to the Global Takaful Report 2017, released at the World Takaful Conference held in April in Dubai, Takaful growth in the GCC reached at a compounded annual growth rate of 18 percent from 2012 to 2015, while Southeast Asia recorded a negative growth of 4 percent due to currency depreciation and Africa grew 19 percent in the same period. As per worldwide market share, the GCC remains the dominant region for Takaful with a global market share of 77 percent, followed by Southeast Asia at 15 percent, while Africa and the Levant region, states like Bangladesh or Pakistan together occupy the remaining market share. It should be clear that Takaful Industry, unfortunately, has lacked far behind in 2016 in Pakistan. In spite of all these reasons, it is expected that the total volume of Takaful industry will reach up till the end of 2017.
Experts analyzed that the Sukuk market in Pakistan, Malaysia, UAE, Turkey, Central Asian states and Africa seem determined this year. Experts also believed that Sukuk value 78 billion dollars approximately are predicted to be issued which can define the total volume of outstanding Sukuk up to 350 billion dollars.
Presently, the government is looking to rise as much as Rs150 billion by issuing fresh Ijara Sukuk in the local market in July 2017 to assist finance its rising budget deficit. It is believed that Pakistan has seen strong growth of Islamic investment funds which has fueled demand for Sukuk. Islamic mutual funds held 242.7 billion rupees ($2.3 billion) in assets as of December, or 37 percent of the total. The government increased Rs866 billion funds by the sale of the Government Ijara Sukuk (GIS) between September 2008 and March 2016.
During October 2016, the government has issued 1 billion dollar of 5-year dollar-denominated Sukuk bonds in order to offset pressure on its balance of payments and return foreign loans maturing in 2016.
The Government of Pakistan reported in the present economic survey FY2017 that the Islamic Mutual funds have posted remarkable growth. The share of Islamic Mutual Funds shows 38 percent of the total Mutual Fund industry as on January 31, 2017.
No doubt, there is a lot of potential among masses for Islamic investment. The concerned authorities on the helm of affairs must take the responsibility in training more people about the importance of Shariah-compliant investing in mutual funds and get its advantages.