WEST PROMOTING ISLAMIC BANKING TO ATTRACT MUSLIM INVESTMENTS

INTERVIEW: ARIFUL ISLAM, CHIEF OPERATING OFFICER MEEZAN BANK

AMANULLAH BASHAR
Apr 21 - 27, 2008

Stellar growth of Islamic Banking at 15 percent internationally has made this financial segment attractive even for the west today and in order to attract investment from the Muslim World efforts are underway to make London as the Hub of Islamic Banking.

Ariful Islam, the Chief Operating Officer Meezan Bank while highlighting the worldwide growth of Islamic Banking referred his experience in the recently concluded Euro Money Conference, a prestigious conference held in London where the representative of the British Government revealed that they were trying to develop London as the Hub of Islamic Banking.

When asked to explain as to why the west was so keen to promote Islamic Banking, Arif replied with a grin on his face, "It is the business and economics attracting the west towards Islamic Banking, they are not in love with the Islamic Banking otherwise." Actually they are smart enough and making efforts to attract flow of huge petro-dollar from the Middle East especially after the oil boom which has opened floodgate of profits for the oil producing countries.

The west is also aware that the business community of the Muslim World in general and Middle East in particular is reluctant to invest in the west after the events of 9/11. In this backdrop, the British financial managers realize that unless they promote Islamic Banking availability in the west they would not be able to attract Mideastern. Hence they are making all efforts at the government level to promote and develop the segment of Islamic Banking with a focus to make London as the biggest center of Islamic banking in the world.

Ariful Islam, a Chartered Accountant from the Institute of Chartered Accountants England and Wales, joined Meezan Bank in April 1999 as the first Chief Operating Officer of the Bank. Carrying a 15 year experience in the financial sector to his professional credit Ariful Islam also worked for Faysal Bank Limited (FBL) as the Executive Vice President & Regional Manager - South. Earlier he was associated with Muslim Commercial bank as Senior Executive Vice President and Head of Investment Banking Group.

Discussing the journey of growth in Pakistan, Arif said that in fact, the Islamic Banking was receiving a strong support from the Central Bank of Pakistan which lent a true professional support for the success of Islamic Banking in Pakistan. Actually, the success story of Meezan Bank is a good example of this support from the State Bank of Pakistan. Outlining the beginning of Meezan Bank, he said the bank went into operation in 2002 when Dr. Ishrat Hussain, the former Governor State Bank of Pakistan granted the license to Meezan Islamic Investment Bank which was converted into a full fledge Islamic Commercial Bank later on. In fact, the way, the whole process of the first Islamic bank was handled by the central bank, reflected the professional capability of the state bank which has also set up a dedicated department for Islamic banks. "I think that the government was truly supportive to the concept of Islamic banking, which is evident from the exceptional growth of Islamic Banks over the last five years in Pakistan."

Recalling the growth and development of Islamic Banking in Pakistan, Arif said that actually the development of Islamic Banking can be recounted in two phases. The initiative of Islamic Banking was in fact taken by Ziaul Haq in 1985 when it was called Islamization of the Banking system. At that time, the spirit and objective of the first phase of Islamic Banking was right however the way of implementation was not correct, hence it failed to click the idea. The second phase of Islamic bank started in 2002 with the inception of Meezan Bank when Dr Ishrat Hussain granted the first license of Islamic Bank to Meezan Bank. On that occasion Dr. Ishrat had remarked that this is last chance Pakistan has to develop Islamic banking, "if Meezan Bank fails proving a success, the concept of Islamic banking would fail in Pakistan."

"If you look at the growth of Meezan Bank, it is heartening to see that on an average the bank witnessed a growth of around 60 percent plus per annum over the last five years," Arif said. Meezan Bank started its operations with a deposit base of rupee one billion in 2002 and today the size of its deposit base is over Rs54 billion indicating the overwhelming response of the people to the concept of Islamic banks in Pakistan. This striking achievement was not possible only because of the government support but it was the response of the people and the customers, who was the real driving force behind the phenomenal growth of Meezan Bank.

"What really matters is that how the customers respond to your product," Arif said and added that the people responded tremendously to the Islamic Banking that is why so many banks are coming in a while. Six Islamic banks operating in Pakistan are dedicated to Islamic banking while the conventional banks are also operating 13 windows of Islamic banking in Pakistan indicating the overwhelming response of customers or the market.

When asked if the Islamic Banks would also like to open windows of conventional banking vis--vis the conventional banks have established counters for Islamic Banking, Ariful Islam was sharp to response with a sense of confidence that Meezan was not a product rather a philosophy and the mandate of the share holders of Meezan Bank is to promote, develop and build Islamic Banking and strictly avert from doing anything not in line with the concept of Shariah compliance which sets certain parameters to follow. "We have to operate within that frame work," Arif said in a firm tone.