LAHORE: State Bank of Pakistan Deputy Governor Saeed Ahmed has said that there is a dire need to create awareness among people to promote Islamic mode of banking that is fast gaining grounds around the globe.
According to the Global Islamic Finance Report (GIFR) 2016, Pakistan ranks ninth in terms of development of Islamic financial services industry. In 2015, Pakistan was ranked 10th in the ranking. According to a report, compiled by Edbiz Consulting – a London-based Islamic financial advisory company – out of approximately 50 countries of the world ranked in terms of their role in development and promotion of the Islamic banking and finance, Pakistan comes after Malaysia, Iran, Saudi Arabia, UAE, Kuwait, Indonesia, Qatar and Bahrain.
However, the report says countries like Pakistan and Indonesia have huge potential in terms of the Islamic banking and finance due to huge Muslim populations in these countries.
According to an analysis, there is still a capacity of 40 million more people in the banking market that the Islamic finance sector can explore. The past year or two have shown tremendous success for Islamic banking which also signals prospects for further expansion.
In its Islamic Banking Bulletin June 2016, the State Bank of Pakistan (SBP) noted that the Islamic banking industry had witnessed a growth of 7.4 percent in April to June quarter. Its assets reached Rs 1,745 billion while its deposits also increased by 9.3 per cent. This shows a market capitalisation of 13.2 percent. However, this reiterates the fact that there is still a room to grow and the Islamic financing institutions can increase their operations and market shares.
At least 22 banks and financial institutions have shown interest in Islamic banking and financing. Some institutions are offering Islamic and conventional banking services side by side, while some are exclusively offering Islamic mode of banking. Meezan Bank, Bank Islami, Al Baraka Islamic Bank, and Burj Bank are some of the examples of the latter. According to the SBP data, the total network of Islamic banking branches in Pakistan exceeds 2,000 with majority of them situated in Punjab and Sindh provinces. A financial analyst said the primary reason that Islamic institutions were not growing as fast as they should was the lack of awareness and information among the general public. “There are various kinds of speculations attached to the Islamic mode of banking with respect to revenue and profits and many people don’t even try to research more or try it for themselves.” He added that Islamic finance was gaining importance all over the globe and was presenting a practical alternative to the conventional modes of banking.
If Pakistan’s Islamic banking industry manages to gain more market share, there are numerous opportunities for the country’s economy to benefit as a whole. Another analyst said, “If Islamic mode of banking manages to gain only one third of the country’s total market share, it will make Pakistan one of the most important players in the global market.”