Daily Times

Minister for Finance and Revenue Senator Mohammad Ishaq Dar on Monday said almost 21 percent of the banks operating in the country had so far been aligned with Islamic laws due to concerted efforts of the policymakers. Addressing Pakistan’s first international conference on “Islamic Capital Markets,” jointly organized by the Security and Exchange Commission of Pakistan (SECP) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), he said the banks converted into the Islamic system were fully satisfied and wanted to continue with it.

The minister said a strategic plan was in place to develop a vibrant Islamic financing system for which the government had already devised a “National Financial Inclusion Strategy,” encompassing the essential areas in it. Ishaq Dar said Pakistan was among one of the few countries which have a well-developed regulatory framework for the micro finance institution, adding the SECP and State Bank of Pakistan (SBP) had done a good job in this regard. “Pakistan has a comprehensive system of Zakat collection and distribution at both private and public levels,” he added. He said the Islamic financial service industry worked within the regulatory preview of the SECP, consisting of Islamic institutions like Mudarabah, Islamic non-banking financial institutions, Shariah-compliant businesses and Shariah advisors.

The minister mentioned that the size of Islamic financial institutions in Pakistan was estimated to have surpassed $42 billion in 2022; with assets and deposit standing at Rs7.2 trillion and Rs5.2 trillion, respectively. “Assets of Islamic banking industry posted year-on-year a growth 29 percent in the fiscal year 2022; and the network of Islamic banking industry consists of 22 Islamic banking institutions,” he said, adding six out of 22 banks were full-fledged “Islamic banks” and 16 conventional banks were operating with stand-alone Islamic banking branches.

To further strengthen the Shariah-compliant framework and to harmonize the Shariah practices in the Islamic banking industry, the said SBP had adopted four more Shariah-standard accounting and auditing organizations for the Islamic financial institution in July 2022 , and now the total number of Shariah-standard entities reached 20. As per the Islamic Finance News of Malaysia, Ishaq Dar said the SBP had been reorganized as the best central bank in 2022 across the world for promoting the Islamic financing system.

The minister said the incumbent government was committed to promoting the Islamic finance system in letter and spirit and achieving the “goals of transformation” within the five-year timeline given by the Federal Shariah Court. Sharing some details of the Islamic Finance Development Report- 2022, he said there were around 1,679 Islamic financial institutions including 560 Islamic banks operating in 76 countries with a total asset size of Rs4 trillion and growing by 17 percent year-on-year basis.

Overall, Ishaq Dar said the Islamic Finance Development Indicator (IFDI) projected the Global Islamic Finance Industry (GIFI) to grow to $5.9 trillion by 2026 from US dollar $4 trillion in 2021. “Mainly driven by its biggest segments like Islamic banks and Sukuk bonds for the Islamic financing industry, Malaysia, Saudi Arabia, Singapore, South Africa and Jordan seemed to top. ” The finance minister said Pakistan is ‘thriving hard’ to significantly enhance its share and “I am confident that with the help of all of you and professional technical experts, we will be able to achieve this objective, Inshallah,” he expressed optimism while addressing the conference participants.

Highlighting the importance of holding the Islamic Capital Markets Conference, he said it would help determine the future direction and give the fast-changing dynamics of the market. Ishaq Dar said the Islamic Finance Service sector was one of the most rapidly growing segments of the global financial system as it had emerged as an effective tool for financing development worldwide including in non-Muslim countries. He was of the view that major financial markets exhibited solid evidence that Islamic finance was already been mainstreamed parallel to the global financial system and it had the potential to tackle the challenges of extreme poverty and move towards prosperity.