LAHORE: The State Bank of Pakistan (SBP) Deputy Governor Saeed Ahmed said on Wednesday that the Bank had evolved a comprehensive five-year strategy to promote Islamic mode of banking in the country.
Speaking with business community here at Lahore Chamber of Commerce and Industry (LCCI), he said that since the present government had shown its seriousness in Islamic Banking, therefore all possible measures were being put in place to revitalize it.
Under 5-year strategy, he said, the SBP would strive to get 20 per cent market share during this period which was 10 per cent at the moment.
It was not the business community alone that was being taken on board but the educational institutions were also being motivated to initiate research on this important segment of banking that was gaining currency with every passing day.
Deputy Governor said the SBP was in regular contact with Institution of Business Administration (IBA) Karachi for establishment of Centre of Excellence on Islamic Banking, and as soon, the first Centre was established, three more centres would also be established in Lahore, Islamabad and Karachi respectively.
He viewed that Islamic finance was one of the fastest growing segments of global as well as domestic financial sector.
"Islamic finance is all set to establish itself as a better alternative to the conventional financial system having capacity to ensure financial stability and inclusive economic growth," he maintained.
Deputy Governor said that global financial crisis in 2008-2009 had made western financial experts to look for an alternative under which the international financial system could overcome the weaknesses of the conventional system based on fixed predetermined return in the form of interest. The search, he asserted, was for a system that led to equitable treatment of all stakeholders under all circumstances.
A lot of attention was focused on solutions, which were not far from Islamic financing where system allowed fairness of return, sharing of risk and reducing income inequalities.
Saeed Ahmad said, Pakistan was amongst the first few countries that undertook the ambitious aim of Islamising the banking system.
While, the LCCI President Engineer Sohail Lashari said, there was a need to make proper projection of Islamic banking to improve general acceptability and also to encourage and motivate the general masses to consider it as a good option over conventional banking services.
Islamic banking, he said, was not just limited to Mudarabah and Musharakah becuase it covered all banking functions ranging from Agriculture Credit & Microfinance, Housing & SME Finance, Investments in International & Domestic markets and Monetary Management.
Lashari said it was not the case of any doubts on the feasibility of Islamic financial model but low success was the result of unfamiliarity with various Islamic modes of financing. He said, the money market was largely interest bearing and most of the government treasury bills, approved securities and local banks bills were not riba free.
He said the Malaysan government had given certain incentives for investors in Islamic Finance industry till the year 2016 to make Malaysia a regional hub for investment. Similarly, Pakistan could also become a regional hub for Islamic finance if proper regulatory reforms were introduced, he added.
The Lahore Chamber President suggested the government to revamp the existing structure of taxes and duties to make them conducive to Islamic finance to achieve this goal, besides introducing incentives in the form of tax credits to encourage people to invest in Shariah compliant products.
The pace of development of Islamic banking could be expedited through public awareness campaigns, joint lectures of economists and religious scholars and by offering special courses at college and university levels for the students of business administration, he viewed.
The LCCI President said the proper documentation of business activities was essential for investments made on the basis of profit-and-loss-sharing. "We need to provide a conducive business environment to businessmen for being encouraged to adopt best business practices," he added.
Lashari said, there was a perception among the public that some banks who offered certain financing schemes for loaning under Islamic banking mix up some clauses, which were related to conventional banking just to secure their own side.
All such financing schemes for housing, business and vehicle etc. must be verified by the SBP with least possible discretionary power exercised by banks to decide in case of any default, he said.
The LCCI Vice President Kashif Anwar, Executive Committee members Mian Zahid Javaid Ahmad and Talha Tayyab Butt also spoke on the occasion.
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