ISLAMIC BANKING

Global & Pakistan Scene

PROF. DR. KHAWAJA AMJAD SAEED*
Email: principal@puhcbf.edu.pk

Mar 12 - 18, 2007

ISLAMIC BANKING: GLOBAL OUTLOOK

Islamic Banking has registered a steady growth in the world in the last three decades. The annual growth has been 15%. By now, Islamic Banking is being practiced in nearly eighty countries of the world. However there are some countries where Islamic Banking is being practiced with Parallel, Banking System. These countries include Malaysia, Bahrain and some Gulf Islamic Banks and Financial Institutions. Alone in Bahrain there are twenty six Islamic Banking net works which are operating. Excellent intellectual work has been conducted in Bahrain by Auditing and Accounting Organization for Islamic Institutions. In Malaysia and Indonesia the growth of Islamic Banking has been very fast.

It is hoped that with passage of time more or more countries will have Islamic Banks.

PAKISTAN'S POSITION

Following the issuance and guidelines through BPD circular No.1 dated 1st January, 2003 by the State Bank of Pakistan for permission to establish stand alone branches for Islamic Banks, leading to the issuance of the 1st Islamic Banking Branch licence to MCB Bank in May 2003, six branches started commercial business, while applications of other banks were later considered and some of them were granted licence.

As of December 31, 2005, there were eleven Islamic Banks operating with seventy branches. Their position is captured in Box-1.

Box 1: ISLAMIC BANKS IN PAKISTAN

COMPOSITION

NUMBER OF BRANCHES

NUMBER OF BANKS

- Full-fledged Islamic Scheduled Banks

37

2

- Stand - alone Islamic Branches of existing Scheduled Banks

33

9

Total

70

11

Source: Compiled from: Statistics on Scheduled Banks In Pakistan, December 2005, SBP, Statistics Department, Karachi, Table - 10, P. XXI.

In respect of operational position of full-fledged Islamic Schedule Banks and Stand- alone Islamic Branches of existing scheduled banks relating to June 2005 and December 2005, the position is included Box-2.

Box- 2: ISLAMIC BANKS BRANCH NETWORK 

 

PARTICULARS

DECEMBER 2005 (NUMBER)

JUNE 2005 (NUMBER)

A

Full-Fledged Islamic Scheduled Banks:

37

31

1. Meezan Bank Ltd.

28

23

2. Al-Barka Islamic Bank BC

09

08

B

Stand-alone Islamic Branches of Existing Scheduled Banks:

33

29

Bank Alfalah

15

15

MCB Bank Limited

1

1

The Bank of Khyber

1

1

Standard Chartered Bank Ltd

4

3

Habib Bank AG Zurich

5

5

Bank Al-Habib

1

1

Habib Bank Limited

1

1

Metropolitan Bank Limited

3

1

Soneri Bank Limited

2

1

Total

70

60

Source: Computed from: Statistics on Scheduled Banks In Pakistan, December 2005, SBP, Statistics Department, Karachi, Table - 9, P. XX.

Besides the above position an interesting analysis has been carried out by us in respect of Deposits, Financing and Investments and the over all position is captured in Box-3.

Box-3:ISLAMIC BANKS: DEPOSITS, FINANCING & INVESTMENTS

PARTICULARS

PAKISTANI BANKS

FOREIGN BANKS

TOTAL

Dec

June

Dec.

June

Dec.

June

2005

2005

2005

2005

2005

2005

1. DEPOSITS

.

Accounts (Number)

98,487

68,962

28,649

26,828

127,136

95,790

.

Amount (Rs. b)

37

30

12

9

49

39

2. FINANCING (*)

.

Accounts (Number)

13,526

9,989

2,435

1,134

15,961

11,123

.

Amount (Rs. b)

36

26

10

9

46

35

3. INVESTMENT

.

(Book Value-Rs.b)

1.7

1.6

104

589

1.81

2.2

Source: Edited from: Statistics on Scheduled Banks In Pakistan, December 2005, SBP, Statistics Department, Karachi, Table - 10, P. XXI. (*) Includes advances and bills.

RECOMMENDATIONS

It is high time that business schools in Pakistan may start offering MBA either in Islamic Banking or offer specialization in Islamic Banking. This will produce a new breed of Pakistan Bankers who will logistically equip Islamic Banks to operate the same in a befitting manner.

Moreover, it is suggested that the scope of Islamic Banking should be aggressively pursued with competitive spirit. Innovative products should be developed by Islamic Banks so that they can reach wider market and capture it.

* Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan,

Member Governing Council, International Federation of Accountants (IFAC) (1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan (1997-2000), President, Association of Management Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1973-1996).