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Growth of Islamic Finance

Growth of Islamic Finance


Azhar Aslam

Head of Islamic Banking & Governance Head Central Region
Standard Chartered Bank Pakistan Limited – (SCBPL)

Azhar Aslam is a seasoned banker having over 25 years of experience in foreign banks, of which the last 13 years have been dedicated to Islamic banking. He has worked across nationally and internationally across geographies with financial organisations including American Express, Citi, Dubai Islamic and Standard Chartered. During his career Azhar Aslam has lead diversified businesses and held senior positions in Product Development, Franchise & Risk Management functions.

Currently Azhar Aslam is the Country Head, Islamic Banking (Saadiq) and is additionally the Governance Head (Central) for Standard Chartered Bank Pakistan. Under his leadership Islamic Banking business for SCBPL has become a key contributor to the overall country revenue of the bank. Saadiq is also the 2nd largest Islamic Banking window in Pakistan.

Azhar Aslam is a member of the advisory Council of Lahore School of Management Sciences for Islamic Finance and a member of Pakistan Banking Association committee on Islamic Banking.

He actively participates in community services through employee volunteering for social causes like education and support to the less privileged in the society.

He is also a Member of the Diversity & Inclusion Council at SCBPL

Azhar Aslam holds an MBA degree from Institute of Business Administration, Karachi.

He is married to Syma and has three daughters.


Over the past few decades, the Islamic finance industry has seen significant growth and is now estimated to have crossed US$2 trillion dollars in assets. The ecosystem surrounding Islamic finance has also developed exponentially with the emergence of a full-suite of Shariah compliant offerings, such as Takaful, Islamic funds, Shariah Advisory firms, Sukuk and more.

There are many variables which have contributed to the growth of Islamic finance worldwide. Perhaps most important is the introduction of sophisticated regulatory regimes, which have slowly built the confidence of customers, leading to an increased demand for Shariah compliant financing. As well, the emergence of international bodies such as the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOFI) and the International Islamic Financial Markets (IIFM) have played a strong part in creating industry-wide standards and consistency.

Shariah scholars and governments have also played a vital role in the growth of Islamic finance. Over the past two decades, scholars have addressed industry challenges by working closely with industry stakeholders to provide practical and innovative Shariah compliant solutions.

These solutions have received support from governments, specifically in Muslim-majority countries, through the introduction of legislative changes. For example, we have seen governments addressing liquidity challenges through the issuance of Sukuks, making Islamic financing a more appealing choice for government borrowings.

Challenges faced

The Islamic finance industry has achieved many milestones since its establishment and has helped finance sovereigns, corporates and financial institutions. Nonetheless, it has been faced with several challenges which have impacted the industry’s growth rate.

The most obvious challenges are the limited number of existing Shariah scholars with banking and finance experience, lack of product standardisation, and shortage of skilled personnel to support the continuous growth of the industry. In fact, a recent study by Middle East Global Advisors found that 64percent of industry executives believe that there is a limited number of suitably qualified staff for the Islamic finance industry. However, various initiatives are being put in place to overcome these challenges and exceed growth in the long run.

Some of these challenges are being addressed naturally, as an increasing number of young people are working and training towards becoming Shariah scholars. At Standard Chartered, the Bank has taken various measures to up skill Islamic Banking staff across all levels of the organization and track, monitor and show progress to the Shariah Board and the regulator.

Additionally, with the growing interest in FinTech, some markets have taken initiative to create a more stable and centralized system by implementing technology such as blockchain for a more efficient and secure transaction which also reduces costs.


Islamic Finance in South East Asia and the Middle East

Looking at specific regions, there is a slight gap between the Islamic markets across South East Asia and the Middle East in terms of owning a more centralized framework. Some countries in the Middle East have had an established model for regulations, while others are actively implementing separate guidelines on Islamic finance.

Overall, international organisations have emerged to promote international consistency within the industry, including the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the International Islamic Financial Markets (IIFM).

Islamic Finance in Pakistan

In Pakistan market share of Islamic Banking assets and deposits in the overall banking industry has been growing steadily and stands at 13.5percent and 15.5 percent respectively by end of December 2018. The network of Islamic Banking industry consists of 22 Islamic Banking institutions: 5 full-fledged Islamic Banks and 17 conventional banks.

Conventional banks with Islamic banking set-up have played a significant role in the growth of the industry in Pakistan evidenced by the branch network and contribution to overall assets in the industry. The number of Islamic banking windows by conventional banks having standalone Islamic banking branches stood at 1,288 (total branch network of Islamic banking Industry was recorded at 2,851 branches) accounting for 45 percent. On the asset side, Islamic banking branches of conventional banks account for 40 percent share as of December 31, 2018.

Positive role of regulator

State Bank of Pakistan has continued to play a positive and significant role in steady growth of the industry whilst ensuring Shariah compliance.

Recently, State Bank of Pakistan in collaboration with Islamic Banking Industry and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), facilitated the project of translating AAOIFI Shariah Standards into Urdu language. SBP provided a platform for the smooth execution of this project. Urdu version of the Shariah Standards will serve a long way in improving awareness about Islamic Finance especially amongst Shariah Scholars, academia and practitioners of Islamic finance. The project will promote research work on Islamic Finance in the Urdu Language.

Room for growth

While there have been many advancements in Islamic Finance, there is still room for growth.

Firstly, while the markets in Southeast Asia and the Middle East have made significant progress over the years, there is still opportunity for the market in Africa. Islamic finance is expanding rapidly across the continent, spreading to 18 markets across the Sub-Saharan continent with great prospects for growth. In fact, a large population of the market remains unbanked or under-served, which provides a solid foundation for Islamic banking assets to grow rapidly. Also, the issuance of Sukuk across Africa has recently picked up momentum due to an increased demand for Shariah compliant financial assets. Most of the bonds are currently in the local currencies, but they are expected to access the US Dollar International Sukuk market in the near future.

Secondly, a main focus for Islamic banking organisations has been on replicating Shariah compliant alternates to conventional products. A great example of this is the implementation of digital in Islamic finance. By leveraging innovative solutions in FinTech, such as blockchain, and artificial intelligence in payment platforms, Islamic banks will be able to take the lead in the banking and financing industry. These innovative solutions will provide more secure and convenient transactions with improved governance, which will appeal to various stakeholders.

In terms of knowledge sharing, there is still a huge progress to be made in educating people about Islamic financing, which would require a committed and collaborative effort from both financial and academic institutions.

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