Consumer Banking Chief speaks on achievements in Islamic Banking

Aug 15 - 21, 2005

Standard Chartered Bank, being the senior most foreign bank in this region, has its own experiences of the banking system and its products especially the concept of Islamic Banking and the response of the market in Pakistan and elsewhere around the world.

Raheel Ahmed, Head of Consumer Banking was interviewed by PAGE to highlight the performance of Standard Chartered especially in the Islamic Banking products in and outside Pakistan.

In fact, the concept of Islamic Banking has successfully made its presence felt amidst conventional banking products which is reflected in its growth at an exponential rate in the global financial markets.

PAGE: Did you confront any difficulties in introducing the concept of Islamic Banking in Pakistan?

RA: Standard Chartered is the oldest and largest foreign bank operating in this region for more than 150 years. Our presence in almost 60% of the Muslim world provides a unique ability for the bank to understand, structure and deliver Islamic solutions suitable to its customers.

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 meet the demands of the customers in line with their requirements. We are proud to be the first international bank in Pakistan to offer Islamic Banking products and services. The response we got from the Pakistani market is very encouraging. We are experiencing high growth in the asset as well as the liability side.

PAGE: Would you like to throw some light on the global scenario of Islamic Banking?

RA: Islamic Banking is growing at an exponential rate in the global financial markets. There has always been a demand among Muslims for financial products and services that conform to the Shariah (Islamic law). Based on this demand, a number of local and multinational banks all over the world have started offering products and services that are in compliance with Shariah. With an estimated size of over USD 250 billion and a growth rate of 15% per annum, Islamic banking has now established itself as one of the fastest growing segment.

PAGE: Would you like to highlight salient features of the Islamic Banking products, which Standard Chartered Bank is offering currently?

RA: On the assets side we are offering Islamic Home Finance and Islamic Auto Finance while on the liability we are offering Islamic Current Account. Let me take you through the features of these products.

Our Islamic Home finance product is structured under the concept of Diminishing Musharaka. Under this concept, the customer and the bank enter into participation where Bank may provide a larger share of the purchase price of the property. As part of the agreement Bank will allow usage of the property to the customer over a period and the customer makes regular payments or rent for the use of property. The customer will make regular scheduled investments in the participation to increase its share in the property. Thus, with each payment customer ownership in the property grows. Once the customer has purchased the complete share, he becomes free and clear title owner of the property.

Our Islamic Auto Finance product is also being offered under the concept of Diminishing Musharaka. This product has been branded as MusharaCAR - Pakistan's first Musharaka-based auto finance.

Our Islamic Current Account provides an end-to-end solution to our customers in total compliance with Shariah principles. The product facilitates a non-profit bearing deposit for customers and with the help of established Shariah principles it is ensured that the funds deposited in the account are deployed in a Shariah compliant venue.

PAGE: Would you please elaborate on your Islamic Auto Finance product - MusharaCAR? How is it different from conventional Auto Loan?

RA: The product is different from the conventional auto loan in the following ways:

a) The customer and the bank are the joint owners (Musharaka) of the car, whereas in case of conventional loan, the bank gives the customer an interest-bearing loan, from which the customer buys the car.

b) The customer pays rent for the use of bank's share in the car, whereas in conventional loan, the customer pays interest.

c) The customer over the period of the financing, purchases the banks share in the car and at the end of the tenure becomes the full and clear owner.

d) Islamic Auto Finance product is approved by our Shariah Board which comprises world's renowned Shariah scholars.

PAGE: would you like to introduce members of Shariah Supervisory Committee of your bank?

RA: Our Shariah Supervisory Committee consists of renowned Shariah scholars Dr. Abdul Sattar Abu Ghuddah and Sheikh Nizam Yaqubi.

Dr. Abdul Sattar Abu Guddah is member of the Shariah Supervisory Board of several Islamic institutions in various parts of the world, including the Middle East and Europe. Dr. Sattar holds positions of Shariah Advisor and Director, Department of Financial Instruments at Al-Baraka Investment Co. of Saudi Arabia. He has also served in the Ministry of Awqaf, Kuwait. He holds a Ph.D. in Islamic law from Al-Azhar University Cairo, Egypt. He is an active member of the Jeddah-based Islamic Fiqah academy and was a member of the Fatwa Board in the ministry from 1982 to 1990.

Sheikh Nizam Yaqubi is current member of the Shariah Supervisory Board of several Islamic institutions in various parts of the world, including the Middle East and Europe. Since 1976, Sheikh Yaqubi has taught Tafsir, Hadith and Fiqh in Bahrain. He is also the author of several articles and publications on Islamic finance and other sciences in English and Arabic. He was educated in the classical Shariah sciences in his native Bahrain and in Makkah. He received his M.Sc. in Finance from McGill University, Montreal, Canada.

PAGE: What sets your products apart from your competition?

RA: We are an international bank and take advantage of our extremely talented and experienced people and strong network of offices situated in over 55 countries across the globe. We are focusing our efforts to ensure that our Islamic products are innovative, yet they strictly comply with Shariah principles. The bank takes guidance from renowned scholars and all its products are supervised and reviewed by the above mentioned independent Shariah Supervisory Committee. Additionally, our state-of-the-art systems, strong focus on training of our staff and streamlined processes enable us to offer Islamic products and services to our customers at world class standard.