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Islamic Finance: a way forward to develop blue economy in Pakistan

A nationwide campaign of Bahria University to promote Blue Economy

The goal of Islamic finance is to bring greater justice and strive to achieve socio economic development it serves as a tool to foster economic growth and human well-being. Promoting risk-sharing instead of debt-financing, reduces poverty and inequalities which are the necessary objective of the needs to be addressed by economic development policy makers by which corporations in the Muslim world, including banks and other lending institutions, raise capital in accordance with Shariah, or Islamic law. It also refers to the types of investments that are permissible under this form of law (Islam’s law). A unique form of socially responsible investment. Developing the ocean economy or Blue Economy is one of the main domains identified in Holy Quran to develop, receive and explore the benefits from the sea for developing economic systems.

Surah An-Nahl 16:14: And it is He who subjected the sea for you to eat from it tender meat and to extract from it ornaments which you wear. And you see the ships plowing through it, and [He subjected it] that you may seek of His bounty; and perhaps you will be grateful.

 

In the upcoming years ocean is the new economic frontier. It holds the promise of immense resource wealth and great potential for boosting economic growth, employment and innovation. And it is increasingly recognized as indispensable for addressing many of the global challenges facing the planet in the decades to come, from world food security and climate change to the provision of energy, natural resources and improved medical care. While the potential of ocean to help meet these challenges is huge, it is already under stress from over exploitation, pollution, declining biodiversity and climate change. Realizing the full potential of the ocean will therefore demand responsible sustainable approaches to its economic development.

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In Pakistan, Islamic banking shows a progressive performance with a robust performance of banking indicators. Its operations engage non bank financial institutions, Islamic money and capital market and Takaful (Islamic insurance) with the ultimate target of financing the real sector and improving the economy. Indonesia will bring these Islamic financial policies to develop their Blue Economy (either in tourism, fishing and extraction of minerals and to explore many blue opportunities) and becomes the role model for all Islamic nations to follow so there is a need that Pakistan will use these finances to boost Blue Economy by not only exploitation of resources but also through identification of opportunities which leads to economic prosperity of Pakistan.

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But gains depend on setting of targets, policies to follow and the real implementation. The Blue print requires six basic initiative programs to be implemented in upcoming 5-10 years which are:

  • Increasing the Shariah compliance.
  • Increasing the quality of prudential banking operations.
  • Increasing the operational efficiency and competitiveness.
  • Increasing the stability of banking system.
  • Increasing the expertise and quality of human resources.
  • Optimizing the social roles of Islamic banks in developing the small and medium enterprises (SME).

Such Blue print becomes guidance for banks, banking regulators, government and all related parties to determine their long term strategies and programs to expand the industry. Further, in order to boost the market share of Islamic banking State Bank should create a grand strategy for the development of Islamic banking industry which develops significantly and promisingly. Its operations have been so far very robust to give a contribution in the Blue economic performance. The engagement with the Islamic money and capital markets, Takaful and non bank Islamic financial institutions has interlinked the operations of other industries too.

Ms Urooj Aijaz & Madiha Kamal (Faculty H&SS Dept. Bahria University Karachi
Ms Maheen Sajid (Student of BS-Economics; Bahria University Karachi)

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