Finance Minister Ishaq Dar on Monday said National Savings, a state-owned entity, would launch Shariah-compliant products that would feature savings accounts, and term-account in the coming days.

“I am pleased to announce at this historic occasion, that National Savings, an attached department of the Ministry of Finance, has prepared to launch Shariah-compliant products for investors,” Dar said while addressing Pakistan's First International Conference on Islamic Capital Markets.

“The products will cater to persistent public demand for safe investments in line with the principles of Shariah,” he said. “They will be in the form of saving accounts and term-account of 1-, 3- and 5-year tenors, with frequent profit payments ranging from monthly, semi-annually, and end to maturity.

"We will share more details of this scheme with the public soon,” Dar added.

In his opening remarks, Dar said Islamic finance is among the rapidly growing sectors of the global financial system.

“It has emerged as an effective tool for financing development worldwide including in the non-Muslim countries.”

The finance minister said Islamic finance has the potential to address the challenges of ending poverty and boosting shared prosperity.

“Islamic finance is equity-based, asset-backed, ethical, sustainable environmentally and socially responsible. It promotes risk-sharing and connects the financial sector with the real economy and emphasizes financial inclusion and social welfare,” he said.

Dar was of the view that Islamic finance offers considerable benefits for economic growth, and can “significantly contribute to economic development given its direct linkage to physical assets and the real economy”.

“In my opinion, Islamic finance deters the artificial leveraging of the financial facilities that are not backed by real assets, which ultimately leads to market crash and global financial crisis,” opined Dar, citing the example of Black Monday, 2007-08 economic crises.

“The leveraging was without the asset backing,” he added.

The finance minister said Islamic finance backed by real assets deters speculation among borrowers.

“According to Islamic Finance Development Indicators (IFDIs), the global Islamic finance industry is projected to grow to $5.9 trillion by 2026, mainly driven by Islamic banks and Sukuks,” Dar added.

“We are striving hard to significantly enhance Pakistan’s share, and I am confident we will be able to achieve this objective,” he said.

Dar said that due to government efforts, nearly 21% of the banking sector in Pakistan has been converted to Islamic banking.

“Pakistan has a strategic plan in place to develop Islamic finance. We have also developed a national financial inclusion strategy that also encompasses many of the areas required to develop Islamic finance,” he said.

“The size of the Islamic finance industry in Pakistan is estimated to have surpassed $42 billion in 2022, and assets and deposits stand at Rs7.2 trillion and Rs5.2 trillion, respectively,” shared the finance minister.

Dar informed the attendees that 22 Islamic Banking Institutions (IBIs) are operating in Pakistan, six of these IBIs are full-fledged Islamic banks, while the remaining have standalone Islamic banking branches.

“The government remains committed to promoting Islamic finance and eliminating interest-based system in Pakistan in letter and spirit and achieve its goal of transformation within the timeline given of five years by the Federal Shariah Court,” he said.

Dar expressed that the government should try to focus on borrowing through Islamic products. “However, I would also request that these Islamic institutions should also be fair in pricing their products,” he said.

The finance minister also requested the top management of the SBP and the Securities Exchange Commission of Pakistan (SECP) to work together to broaden the secondary market of sovereign papers in Pakistan.

“Please make all efforts to develop the secondary markets for the sovereign papers,” he concluded.

Comments

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Truthisbitter813 May 29, 2023 02:06pm
They also need to bring the returns on Shariah-Compliant debt certificates in-line with non-shariah ones. Shariah-Compliant debt is more strongly collateralized than interest-based ones. Yet the returns on the former are far outstripped by returns on the latter which is not acceptable.
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Jani Walker May 29, 2023 04:43pm
7th century thinking. call it interest or profit, both are same in accounting.
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Asif May 29, 2023 05:14pm
Lol..they want to pay less interest/profit in the name of sharia... Conventional Bank accounts are paying 19.5% interest while sharia called accounts are paying 18.5% ...
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Tulukan Mairandi May 29, 2023 05:40pm
What about Shariah compliant loan from Saudi ummah and Iron Brother China.
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AmirSh. May 29, 2023 06:17pm
This guy again! The big question is: is any investor going to trust him?
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Carl May 29, 2023 06:48pm
There is no limit on Sheikh Chilli dreaming!
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Tariq khan May 29, 2023 11:18pm
It is equity only in theory, the depositor has no knowledge, of how and where the capital is invested, on what terms, what are the managing expenses, what are profits, how much tales the bank and how much is given to depositor
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John May 29, 2023 11:50pm
Nothing upstairs!
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Rebirth May 30, 2023 02:26am
Mutual funds and REITs in most cases also follow the same model, by and large. If so, why not place our existing mutual funds and REITs in the same category? Corporate bonds also work in the same fashion because in principle, the bond is to invest in an entity that is likely to earn profit and then share that profit with the investor. If these three financial securities and Exchange Traded Funds, to a lesser extent, are also in compliance with Islamic finance, do we need to recite “Bismillah” and make them Halal before investing? Place them in the same category and find other such financial securities too.
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Qazikhalil May 30, 2023 05:41am
We must have real details of projected income and expenditure statement. Let's see the details.
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Abdul Sattar Soomro May 31, 2023 09:21am
Sir, we hope for reduce income tax on profit. We the oldage persons are so suffering for it. Other the attitude of office bearers are very very bad, kindly attention on it. Thanks.
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