INTERVIEW WITH MR INTISAR M.USMANI, HEAD OF CREDIT RISK & COMPLIANCE FIRST HABIB MODARABA
Sep 10 - 16, 2012
PAGE: TELL ME SOMETHING ABOUT YOURSELF, PLEASE?
INTISAR USMANI: I am a Fellow Member of Institute of Cost and Management Accountants of Pakistan, Qualified ICSP, PGD in Islamic Banking and Finance from Center of Islamic Economics a devesion of Darul Aloom Korangi. I have more than 25 years of experience in the field of Financial Market and Industry. Currently, I am associated with First Habib Modaraba as Head of Credit Risk & Compliance. Formerly Chairman ICMAP-Karachi Branch Council, Past President IIAP-Karachi Chapter and also member of IIAP by laws preparation committee.
PAGE: HOW WOULD YOU COMMENT ON PROGRESS OF ISLAMIC BANKING IN PAKISTAN?
INTISAR USMANI: The Islamic Banking industry in Pakistan has grown at a fast track, with an average growth rate of 30 percent during last 10 years. The industry's asset base has reached Rs.650 billion which is around 8 percent of the overall banking industry of Pakistan while deposits represent around 9 percent of the banking system's deposits i.e. Rs.550 billion. The Islamic banking network has also spread all across the country at a significant pace with total number of branches reaching 964 and 500 Islamic banking windows as mentioned by Dy. Governor of SBP while delivering his keynote address on 'Islamic Finance in Pakistan at the Islamic Finance News (IFN) Roadshow - 2012 at SBP. It reflects the nation attitude towards Islamic Banking and Finance despite all odds.
PAGE: WHAT IS YOUR VIEW ON SERVICES/PRODUCTS BEING OFFERED BY ISLAMIC BANKING IN PAKISTAN?
INTISAR USMANI: Islamic Banking is still passing through initial stage. Structure of Islamic banking transactions is based on assets instead of conventional banking transaction base on debt. There are three types of products mainly being offered at the asset side of Islamic Banking institutions, namely trade based like Murabaha, semi equity based i.e Ijarah and equity based like Diminishing Musharkah but based on sharing usufructs of assets rather sharing profit & loss of a business venture. Accordingly, a lot of development needs to be done to develop and market pure equity based products like Shirkat-ul-Aqd, Musharakah and Modarabah. As regards the capital market instruments, privately placed Sukuk are available as an alternative of Conventional Bonds, however there is need to develop Islamic capital market in Pakistan.
PAGE: YOUR VIEWS ON DIFFERENCE BETWEEN ISLAMIC BANKING AND CONVENTIONAL BANKING IN PAKISTAN?
INTISAR USMANI: The key difference between Conventional Banking Institution and Islamic Banking Institution is that products of Islamic Banking are based on Shariah principles. Thus, all dealing, transactions, business approach, product features, investment focus, responsibilities are derived from the Shariah principles, which lead to the significant difference in many parts of the operations with as of the conventional
Amongst the governing principles of an Islamic banking Institutions are:
* The transactions are Ribah Free;
* The transactions are based on taking ownership risk to earn profit;
* To avoid speculation (gharar);
* The discouragement of the production of goods and services which value is not acceptable as valuable consideration like pork and wine
On the other hand, conventional banking is based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other. Interest is considered to be the price of credit, reflecting the opportunity cost of money.
PAGE: YOUR COMMENTS ON GOVERNMENT SUPPORT FOR ISLAMIC BANKING IN PAKISTAN?
INTISAR USMANI: State Bank of Pakistan has played a leading role in promoting the Islamic Banking by issuing legal, regulatory and Shariah compliance framework that has facilitated the growth and development of the industry. Now SECP is also actively participating in promoting the Islamic Finance Industry. The Registrar Modaraba of SECP also issued Shariah guidelines for Modaraba Sector (non banking Shari'ah compliant banking institutions) which was the Pioneer in exercising Islamic Finance transactions in the Country. SBP and SECP are also playing active role in the area of capacity building and creating awareness at mass level.
PAGE: YOUR VIEWS ON FUTURE OF ISLAMIC BANKING IN THE WORLD AND IN PAKISTAN?
INTISAR USMANI: Survival of Islamic banking depends on the following five factors : (1) its economic viability, (2) its stability, (3) its response to challenges to its identity, and (4) confidence of depositors/savers (5) trained human resource. It is pertinent to note that during global financial crises not a single Islamic bank collapsed due to its assets backed structure. We are living in global village where local environment has cross border implications. Islamic banking has very bright future.