ISLAMIC BANKS - THE WAY FORWARD
In an Islamic country like ours where many people are still apprehensive of paying and consuming interest this has come as a breath of fresh air.
Mar 12 - 18, 2007
What drew these customers to alternative financing that conforms to the strict dictates of Islam?
It's all part of a trend in which financial products that comply with the set of Qura'anic laws that govern a Muslim's daily life, or Shariah, are evolving from a novelty into a normal part of doing business in much of the developing world. Islamic banking isn't just for conservative or radical Muslims. It's mainstream business now, that's why every bank wants a bigger piece of it.
From Jakarta to Jeddah, 265 Islamic banks and other financial institutions are now operating in some 40 countries with total assets that top US$262 billion. That pot of money, the investment of which adheres to the Qura'an's prohibition against receiving or paying interest, has been steadily building since 1994, when Malaysia created the world's first Islamic interbank money market. Now Islamic banking has broadened its appeal well beyond the confines of faithful Muslims. Indeed, nearly one-quarter of all Islamic banking business in Malaysia is being transacted by non-Muslims.
Islamic finance was long the preserve of specialty banks that handled Shariah-compliant products exclusively, such as Malaysia's top-ranked Bank Islam and Saudi Arabia's Al Rajhi Banking & Investment Corp. But Western banks, no longer content to leave the market to Islamic lenders, are competing for a slice of the business. Keeping the same view in mind, many banks in Pakistan shifted from conventional banking system to Islamic mode. Many specialized Islamic banks made their way into the market whereas many commercial banks opened Islamic branches. These commercial banks saw Islamic banking as a kind of product extension strategies. Islamic banking rests on the concept of profit sharing whereby the depositors are exposed to both profit and loss unlike the commercial banks where they get a fixed return. In an Islamic country like ours where many people are still apprehensive of paying and consuming interest this has come as a breath of fresh air. The success can be gauged by the performance of Al Meezan Bank which started it's operations in 2002 and currently has 62 branches all over the country.
To explore the paradigms of Islamic banking many commercial banks are also opening up their Islamic divisions as it has a lot of potential. Among the commercial banks, Bank Alfalah is taking the lead with 23 IBBs (Islamic Banking Branches) followed by MCB Bank Limited and Askari Commercial Bank with six branches each.
NUMBER OF LICENSED ISLAMIC BANKS AND IBBS AS AT 24 FEB 2007
NO. OF BRANCHES
A) ISLAMIC BANKS
Meezan Bank Limited
Albaraka Islamic Bank
BankIslami Pakistan Limited
Dubai Islamic Bank Pakistan Limited
Emirates Global Islamic Bank Limited
First Dawood Islamic Bank*
Total of A
B) COMMERCIAL BANKS - ISLAMIC BRANCHES
Muslim Commercial Bank
Bank of Khyber
Bank Alfalah Limited
Habib Metro Bank
Standard Chartered Bank
Bank Al Habib Ltd
Habib Bank Ltd
Soneri Bank Limited
Prime Commercial Bank
Askari Commercial bank
National Bank of Pakistan
United Bank Limited
Total of B
* This bank is expected to start operations soon.