BANKING ON ISLAM: ANOTHER FIRST IN PAKISTAN

An exclusive interview with Abid Sattar, Head of Consumer Banking, Standard Chartered Bank

By SHABBIR H. KAZMI
Aug 09 - 15, 2004

Responding to the needs of customers, most of the commercial banks are getting ready to open up dedicated Islamic Banking branches. Embracing the challenge of promoting Islamic Banking and finance has not been easy, driven by continuously evolving opportunities for pious Muslims who routinely press their bankers and fund managers for new products. Pakistan has a substantial market of Islamic Banking.

Standard Chartered's presence in almost 60% of the Muslim world provides a unique ability for the bank to understand, structure and deliver Islamic solutions suitable for its customers. One estimate states total investable funds of over USD 250 billion in Islamic Funds.

Pakistan is one of the most populous Islamic countries in the world with a population of over 140 million. Standard Chartered being the largest international bank in Pakistan is in a position to take advantage of this opportunity and promote Islamic Banking in the country. We believe that Islamic Banking products are very important facilities for our customers and the offering of these products is therefore a key initiative for Standard Chartered Bank.

Standard Chartered Bank is the first International Bank in Pakistan to offer Islamic Banking and has chosen first to offer consumer finance products and will subsequently add corporate finance products. In an exclusive interview with Pakistan & Gulf Economist, Abid Sattar, Head of Consumer Banking, Standard Chartered Bank talked about the potential of Islamic Banking and SCB's strategy.

We opened our new dedicated Islamic banking branch at Hotel Metropole Karachi on July 2, 2004. Standard Chartered Pakistan intends to introduce a full range for both consumer as well as corporate customers. In the first phase, we have launched three consumer products namely, Islamic Home Finance, Islamic Auto Finance and Islamic Current Accounts. These are being offered at both our flagship branch at Hotel Metropole, as well as our other 20 branches across Pakistan. We plan to introduce corporate banking related products during the course of the year.

We have worked extensively to ensure that our Islamic products customers enjoy the same quality experience as our conventional banking customers. However, we have also spent a considerable amount of time and efforts to that all our Islamic products comply with Shariah Principles. The Bank takes guidance from renowned scholars and all its products are supervised and reviewed by an independent Shariah Supervisory Committee.

The peace of mind factor we aim to provide to our customers, with all other benefits, will set our Islamic products apart from other offerings. We believe this will give us an opportunity to appeal to a segment of the customers base that prefers to deal in riba free financial products.

The overall consensus is that eliminating the element of Riba in a short span of time is not possible. Therefore, commercial banks are offering Islamic Banking in parallel with the conventional banking. As such no financial institution is ready to get the hit. In the conventional banking, banks are entitled to receive the interest charges irrespective of the fact whether the borrower is making profit or not. Whereas the concept of Islamic Banking is based on profit and loss sharing system. Therefore, the banks have to be more cautious in credit approval. This helps in containing delinquent loans to all stakeholders of the banking system.

The future of Islamic Banking industry in Pakistan is extremely promising as the State Bank of Pakistan, through its proactive regulatory and promotional policies, is creating a viable environment for market players. At the moment, there are only a few players in the market that are offering Islamic products. However, the demand for Islamic products is increasing and as such large enough to accommodate a reasonable number of banks.

We feel confident that there is an appetite for Islamic products amongst our target customer base and our entry at this point with a range of consumer products will be well received in the market.

To conclude, I would say that the proactive approach of the players as well as the regulators is helping a lot in creating the enabling environment. The customer's response has been very encouraging. Most of the countries are benefiting with the experience of each other and coming with more Shriah compliant products.