Nov 12 - 18, 2007

Dr. Ishrat Hussain Chairman National Commission for Government Reforms has said that we need to explore the unique features of Islamic finance for the larger good of the society particularly in the context of economic growth and poverty alleviation. Islamic finance can be a powerful tool for inclusive growth and amelioration of the conditions of poor in the Muslim countries. He expressed these views while delivering the keynote address at 3rd WorldAsia Islamic Capital Conference here last week.

Most of the attention on Islamic finance has so far been focused on the regulatory framework, products and services offered, comparability with conventional finance, risk management characteristics, Shariah compliance, and expansion and penetration issues.

Dr. Ishrat said that the introduction of Islamic banking has promoted financial inclusion by bringing those who have so far remained outside the conventional banking system thus deepening the financial sector. During the last eight years the number of borrowers from the banking system in Pakistan has risen from 1 million to 5.5 million an impressive rise. But this number can easily double if Islamic banks take measures to penetrate in the above geographical areas and serve those who are currently outside the banking system. Access to agriculture credit, including livestock, fisheries, dairy, SME finance including small mining and transport enterprises, low cost housing finance etc, he added.

In order to win the confidence of their future clients Islamic banks have to take extra precautions and safeguards to ensure that they meet the exhaustive requirements to be Shariah compliant. On the financing side, the Islamic banks must ensure that funds are directed towards identifiable and acceptable productive activities. Most Islamic financing modes ought to be asset backed, i.e. they are used to finance specific physical assets like machinery, inventory, equipment, etc.

He said that Islamic banks and Islamic financial institutions can accelerate their pace of expansion, which will result in poverty alleviation but also reduce income inequalities and foster inclusive growth.

Earlier, speaking to the audience Chairman Islamic Capital Partners Mr. Khalid Rafi said that seeing the current the tremendous growth of Islamic banking sector we can say that it would achieve the 12 % share of overall financial sector in Pakistan. He said that Islamic Capital is committed to promote leading industry forums in and outside Pakistan, and we gratefully acknowledge the support we have received from our partners, especially Dubai International Financial Center (DIFC); Al Jomaih Group of Saudi Arabia, Emirates Global Islamic Bank, UBL Funds, Meezan Bank, Arif Habib Investments, Dawood Islamic Bank and Pak Qatar Takaful, for the whole hearted support in making this conference a reality.

He said that conventional banks are also launching Islamic banking windows. Our total banking system deposit is just under 60 billion dollars, and Islamic banks manage approximately 2 billion of this amount. This represents 3 percent market share, which is surely a commendable achievement over a short history of five years. The targets are even more impressive: today the Islamic banking industry is all geared up to capture 12 percent market share by 2012, a target that we call 12 by 12. Roughly, this translates to an additional 15 billion dollars, or 900 billion rupees in Islamic deposits over the next five years.

Actually, overall Islamic banking industry in Pakistan has come a long way, despite various challenges. Today, we have 6 full Islamic banks operational in the country that have been established with support from leading financial institutions from the GCC. This is also a validation of the tremendous investment opportunities and the growing interest of Sharia' compliant foreign investors in Pakistan.

To achieve the 12 by 12 objectives, Islamic banks have also launched an aggressive outreach campaign and have added one hundred and forty branches in just 18 months. The total branch network stands at close to 218, and is set to quadruple over next four years.

President and CEO Meezan Bank Limited Mr. Irfan siddiqui said that Islamic banks have to put extra efforts to attract their customers as declaring the products Islamic demands more innovation. He said that consumers don't merely come for Islamic products they expect quality and satisfactory services as well. He said that 12% market share target is achievable given the fact that Islamic banks have shown tremendous growth in last five years.

He said that more Islamic banks are planning to launch their operations in Pakistan and there is enough of liquidity in market.

Director State bank of Pakistan Mr. Azhar Qureshi said that state bank of Pakistan is focusing on providing the policy framework and supportive regulations for Islamic banking industry.

Tariq Hussain CEO Emirates global Islamic bank, Executive Chaudhry Mohammad Wasi, Deputy GM Qatar Islamic Bank,D. M. Qureshi Chairman Ankaa Group, Hasan Bilgrami CEO Bank Islami Pakistan, Hussain Dawood Chairman Dawood Group, Nadeem Mujtaba MD Gulf ventures corporations, Najmul Hasan GM Corporate Meezan Bank, Nasim Beg CEO Arif habib investment management, Naz Khan, CEO KASB Funds Ltd, Mir Muhammad Ali CEO UBL Funds managers also spoke on the occasion.