Decrease in interest rate to raise inflation: SBP

HYDERABAD: Director Islamic Banking of State Bank of Pakistan (SBP) Saleemullah has said that inflation would increase in the country if the mark-up rate was allowed to be reduced, adding that a delicate balance between the two had to be maintained.

"A diminished rate of interest also affects the industrial development by stagnating its growth," he explained while addressing a reception organised by the business community of Hyderabad at the Hyderabad Chamber of Commerce and Industry (HCCI) office here Monday.

About the method of Islamic Banking, he apprised that it was done on the basis of profit and loss sharing and that the system also offers solution to many problems.

"In Islamic Banking investment is made on real trade, therefore, the probability of incurring losses is also relatively low," he added.

Saleemullah maintained that there was a great difference between the conventional and Islamic methods of banking as the former system was based on "riba" which was "haram" (forbidden) for Muslims.

The Director Islamic Banking informed the businessmen that SBP was taking steps to promote that type of banking and that the visit to HCCI was a part of the greater awareness initiative.

He encouraged the traders and industrialists to avail the facilities of financing offered by Islamic Banking. Speaking earlier, Chief Manager SBP Hyderabad Ali Hussain informed that SBP was facilitating the business community of Hyderabad and for that it had set up a customer facilitation centre.

He asked the businessmen to forward suggestions to the SBP so that it could further help them in addressing their financial issues.

President HCCI Seth Goharullah apprised the visiting guest that the industrial structure of Hyderabad mainly comprises Small and Medium Enterprises (SMEs) with a 90 percent part.

The sector was facing many difficulties in growth but their problems could be addressed by introducing sustainable financial policies, he added.

Vice President HCCI Ziauddin also spoke on the occasion while Chairman Sub-Committee on SMEs Amad Siddiqui dwelt at length on the issues of SME sector and sought help from the SBP for their resolution.