INTERVIEW WITH MUHAMMAD RAZA, HEAD OF CONSUMER BANKING & MARKETING, MEEZAN BANK
July 2 - 8, 2012
Muhammad Raza has been on his current position at Meezan Bank for last nine years. He has 20 years plus rich experience of retail banking. He did his engineering from NED and then MBA from IoBM. Meezan Bank is the largest Islamic bank and has been categorized as the fastest growing bank of the country. The Islamic Commercial Banking journey of Pakistan and Meezan Bank started in 2002 and this year they are celebrating 10 years of Riba-free banking in Pakistan. Alhamdulillah, the bank has a branch network of 289 branches in 88 cities across Pakistan. They are the volume leaders in consumer finance among both the conventional and Islamic banks. Meezan Bank is the winner of many awards related to Islamic banking and finance.
PAGE: COULD YOU PLEASE TELL US ABOUT THE HOUSE FINANCING PRODUCTS OF MEEZAN BANK, AND ALSO GIVE YOUR VIEWS ON CURRENT SITUATION OF CONSTRUCTION AND DEVELOPMENT SECTOR IN PAKISTAN?
RAZA: Our housing finance product works on the basis of diminishing Musharakah. This is a kind of partnership where the customer and the bank jointly purchase a property and the same is rented to the customer for an agreed tenure. The customer therefore pays the rent for using the property and at the same time returns the share of the bank in the property on monthly basis. There are two portions of the monthly payment: one is the rent and the second is ownership. With every passing month, the ownership of the customer increases and there is a subsequent decrease in rent. This continues till maturity where the customer becomes 100 per cent owner of the property and the rent amount becomes zero.
The current situation of construction and development sector is not very bright rather it is bleak. Construction sector is globally recognized as an important area for the economic development of any country. It feeds and creates opportunities for 50 plus related industries, which not only create employment but also at the same time contribute in the GDP. In Pakistan, due to various unresolved issues for decades, this is a rather neglected area.
PAGE: HOW WOULD YOU COMPARE BANKING HOUSE FINANCING TEN YEARS AGO AND TODAY?
RAZA: Housing finance is another area which has remained neglected since long. Banks have continuously emphasized at various forums that mortgage business is very important for the development of construction industry, which can boost the economy. But, it is a sorry sight that nothing much has been done on this front. The mortgage to GDP ratio is the indicator of importance of mortgage in the country. In developed counties of Europe and America, this ratio is as high as 70 per cent whereas in countries like Malaysia it is 20 per cent. Even in India, this ratio is expanding over eight per cent. In Pakistan, it is shrinking rather than growing and is now around 0.5 per cent, which is the lowest in the league around the globe.
PAGE: COULD YOU GIVE YOUR INPUT ABOUT IMPACT OF ECONOMIC PROBLEMS ON CONSTRUCTION AND DEVELOPMENT SECTOR?
RAZA: The economic woes have a natural impact on the construction industry. The rising inflation, high cost of borrowing, and growing unemployment have reduced the disposable income of average Pakistani. The need for houses for the Pakistani population is there but the demand is not increasing due to the mentioned factors. In fact, there is a backlog of 900,000 housing units, which increase with each passing year.
PAGE: YOUR VIEWS ON CONSTRUCTION AND DEVELOPMENT SECTOR GROWTH.
RAZA: The potential in construction and development sector is very high but the focus, which is required by the government, is very low. There are various bodies, which are continuously striving to bring improvement but the fact is that nothing will work until there is seriousness at the ministry level. The high-ups at Islamabad need to understand the importance of this sector and the government can play great role for the economic development of the country.