EXCLUSIVE: HEAD OF ISLAMIC BANKING OF STANDARD CHARTERED

Standard Chartered: The first international bank to receive lincense for Islamic banking in Pakistan; soon to open branch in London

By AMANULLAH BASHAR
Mar 27 - Apr 02, 2006

Standard Chartered, the first international bank having the distinction to be the first international bank in Pakistan to receive the license of Islamic Banking from the State Bank of Pakistan.

The bank's leadership is confident that the financial system in Pakistan has a promising future for the Islamic Banking industry and has chalked out a comprehensive plan of introducing of a full range of Islamic Banking products capable of successfully competing with the conventional products.

LIST OF ISLAMIC BANKS OPERATING IN PAKISTAN

Meezan Bank (1st Islamic Bank Of Pakistan)
Askari Commercial Bank Ltd.
Soneri Commercial Bank
Faysal Bank
Bank Alfalah Ltd.
Muslim Commercial Bank.
The Bank Of Khyber.
Albaraka Islamic Bank.
Prime Commercial Bank.

To have an overview of the current status of the Islamic banking in Pakistan, PAGE conducted an interview with Muhammad Imran, Head of the Islamic Banking in the Standard Chartered.

PAGE: However would you evaluate or quantify growth of the Islamic Banking and its market share in Pakistan?

IMRAN: As such it is very difficult to exactly point out the exact growth rate of market size of the Islamic banking in Pakistan, yet the popularity of the concept of Islamic banking and its acceptance in the market is reflected in the fact that the Standard Chartered had initiated this concept with its first branch in Karachi sometimes back. Today, Standard Chartered have three branches of which two are successfully operating in Karachi and the third branch is operating in Lahore. Apparently, this growth of operations in the Islamic Banking substantiating that concept of Islamic Banking taking its roots in our financial system.

PAGE: Is the Standard Chartered, as an international bank has initiated the concept of Islamic banking in other parts of the world?

IMRAN: Standard Chartered has also started Islamic Banking in UAE and Bangladesh and has a very well established set up in Malaysia as well, which makes Standard Chartered a leading solution provider through Islamic Banking services across the Muslim World. Besides the Muslim Countries, the Standard Chartered is actively considering to establish another branch of Islamic banking in London in near future"

PAGE: would you like to comment on future growth of Islamic Banking in Pakistan?

IMRAN: Pakistan with a population of approximately 140 million is one of the largest Islamic countries in the world. Being a country with majority of the people following the Islamic faith, Islamic banking naturally a friendly way of banking and is likely to be a strong financial player in the days to come.

PAGE: Don't you think that the title of Islamic Banking would keep people belonging to other religions away from Islamic Banking?

IMRAN: Actually, the concept of Islamic Banking does not clash with any religion or sect as like Islam; all other religions like Christianity, Jews or Hinduism denounce or reject the concept of interest as well. Hence the Islamic banking is in conformity to other religions as well and a large number of non-Muslims are the customers of the Islamic Banking.

PAGE: Would you like to elaborate or outline the basic theme of Islamic banking?

IMRAN: The guiding principles for Islamic societies are a collective set of rules and laws referred to as Shariah. Shariah Laws apply to all aspects of the Muslim life and finance too is not an exception.

The future of the Islamic Banking industry in Pakistan is extremely promising as the State Bank of Pakistan through its proactive regulatory and promotional policies is creating a conducive environment for the market players by providing a level playing field. There is enormous potential in this area and as such, we must focus our energies and exploit this opportunity to its fullest.

Keeping this in mind and requirements of customers who wanted Shariah compliant financial products, Standard Chartered Bank in Pakistan became the first international bank to receive an Islamic banking branch license from the State Bank of Pakistan, and also the first international bank to start offering Islamic banking products to the customer base through dedicated Islamic banking branches.

PAGE: What are the products your bank has launched in the market under Islamic mode of financing?

IMRAN: "Our offering at present includes Islamic Current Account, Islamic Auto Finance, Islamic Home Finance, Short term Murabaha financing and Islamic import financing.

Standard Chartered Bank is the first bank in Pakistan to launch Musharka based auto financing product.

PAGE: How these products are different from the conventional products?

IMRAN: "Our product offering has been developed through extensive research and guidance from an independent Shariah supervisory committee and our dedicated Islamic Banking team. We are focusing our efforts to ensure that all our Islamic products comply with Shariah Principles.

PAGE: What arrangements your bank has made to handle the operations under Islamic banking system as it is different from the conventional system?

IMRAN: The Bank takes guidance from renowned scholars and all its products are supervised and reviewed by an independent Shariah Supervisory Committee. The current members of Standard Chartered Shariah supervisory Committee are including Dr. Abdul Sattar Abu Ghuddah who is based in Jeddah and Sheikh Nizam Yaquby from Bahrain. Both Dr. Abu Ghuddah and Sheikh Yaquby are renowned scholars and respected in the field of Islamic finance and investment.

PAGE: Would you like to elaborate some of your products initiated under Islamic Banking?

IMRAN: "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 that 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, becomes free and clear title ownership of the property.

MusharaCar is another innovative Islamic Auto Finance product which is being offered under the concept of diminishing Musharaka. Under this concept, the bank and the customer becomes a partner in the car. The customer purchases the banks share over the period the financing and also pays rent for the use of banks share. Once the customer has purchased the complete share, he becomes free and clear title owner of the car.

The Islamic Current Account is another product of Standard Chartered which provides an end-to-end solution to the customers in total compliance with Shariah Principles. The product facilitates a non-interest 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 the Shariah Compliant venues.

ISLAMIC BANKS IN THE PIPELINE

Emirates Global Islamic Bank Ltd
Bank Islami Pakistan Ltd.
Dubai Islamic Bank Ltd.
First Dawood Islamic Bank Ltd.