KARACHI: The State Bank of Pakistan (SBP) has allowed Islamic Banking Windows (IBWs) to finance all types of products including corporate, SMEs, agriculture, housing and consumers with an objective to enhance the share and outreach of Shariah-compliant banking services to the people of Pakistan and contribute in overall financial inclusion.

Keeping in view the significant potential of IBWs, the SBP Wednesday issued revised instructions to banks to expand the scope of operations of IBWs.

As per revised instructions, IBWs can now offer all types of financing products to their customers including corporates, SMEs, agriculture, housing, and consumers. However, this facility is subject to the condition that the respective IBW branch will be converted into full-fledged Islamic banking branch within a period of three years.

At present, Islamic banking products and services are being offered by full-fledged Islamic banks, Islamic banking subsidiaries and Islamic banking branches of conventional banks after getting approval/license from SBP.

Conventional banks can open IBWs, which are dedicated counters in conventional branches, after getting permission from SBP; however, these were not allowed to offer any financing products.

According to SBP, IBBs are encouraged to offer Shariah compliant program based financing products and one-window operation products with a view to reduce turnaround time (TAT) and quick access to finance especially the financing needs of farmers and SMEs. However, no third party products & services will be offered by IBWs without prior approval of the SBP.

All products & services offered by IBWs will be in line with applicable prudential regulations and other guidelines/instructions issued by SBP from time to time. Further, product manuals/SOPs of all financing products and deposit schemes being offered by an IBW are available to the concerned staff for any reference and use.

With 1,400 IBWs of 11 banks currently operational in the country, their potential to improve access to finance will increase significantly. Further, it will contribute towards increase in financial inclusion through provision of Shariah-compliant financing facilities to vast majority of population.

The revised instructions also incorporate different amendments or additions to existing regulations and include policy formulation on IBWs, submission of annual IBWs expansion plan, physical setup & display requirements for IBWs, opening & closure of IBWs, their fee structure, and revisions in reporting requirements. These revised instructions will supersede all previous instructions issued on IBWs by SBP from time to time.

Islamic Banking Branches (IBBs) operating or desiring to operate IBWs will be required to develop a Policy containing details on functioning of IBWs duly approved by their Shariah Board (SB) and Board of Directors (BoD) before approaching SBP for permission. It is expected that this new policy measure will contribute towards achieving the targets set under National Financial Inclusion Strategy for Islamic banking, which envisages attaining a share of 25% percent in total assets and deposits of the banking industry and 30% share in total branch network of the industry by the end of 2023.

Copyright Business Recorder, 2020


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