Ahmed Ali Siddiqui Founding Director Centre for Excellence in Islamic Finance (CEIF) at Institute of Business Administration (IBA) Friday said that Pakistan's Islamic Banking Industry (IBI) is rapidly growing and its deposits are likely to reach Rs 4 trillion historic mark in 2020. Talking to newsmen at the introductory press conference of CEIF here, he said that in collaboration with Meezan Bank, IBA has set up CEIF to produce skilled workforce for the growing IBI of the country.
He said that less skilful human resource on Islamic finance is a major challenge to the fastest growing IBI and ahead of this challenge the Centre for Excellence in Islamic Finance has been set up at IBA. "Cost efficiency to bring it on par with conventional instruments and lack of financial architecture & technical assistance are some other challenges," he added.
He said presently around over 700 Islamic financial institutions are working world-wide with a total size of $1.7 trillion and so far over 45 Shariah & Accounting Standards for Islamic financial institutions have been issued by AAOIFI. It is being estimated that the size will surge to $5.0 trillion by 2020, he added. Ahmed said that Islamic banking is a globally accepted reality and a viable alternative to interest based banking. "The IMF reports also noted that because Islamic banking forbids pure monetary speculation and stresses that deals should be based by real economic activity and it could pose less risk than conventional banking," he added.
More than 75 countries have Islamic Banking Institutions and approximately 45 Muslim countries including Kuwait, Dubai, Saudi Arabia, Iran, Malaysia, Brunei and Pakistan and approximately 30 non-Muslim countries including USA, UK, Canada, Switzerland, Sri Lanka, South Africa and Australia. In addition, Oman, Tanzania, Djibouti, Singapore, Germany and Hong Kong are new players in the industry.
Talking about Pakistan's Islamic banking industry, Ahmed said branch network of IB participants has already reached 1,597 with asset base of Rs 1.302 trillion and deposit base of Rs 1.12 trillion by end-CY15. "Its growth rate since inception is around 35 percent and presently IBI share in the overall banking industry stands at 12.8 percent. With current momentum of growth, it is being expected that Islamic banking share will surge to 20 percent with over Rs 4 trillion deposit base in 2020," he added.
Appreciating the central bank's role for the promotion of Islamic banking in Pakistan, Ahmed said that SBP has taken several steps for promotion of Islamic banking this includes issuance of 5-Year Strategic Plan for the year 2014-18, introduction of Islamic Export Refinance, adoption of Key AAOIFI Shariah Standards as part of Regulations, three New Accounting Entries for Islamic Modes of Financing, GoP Ijara Sukuk issued over Rs 500 billion, specific Pool Management Guidelines for IBIs and Islamic benchmark and Islamic LLTF scheme. The SBP is aggressively working for Islamic discount window, he added.
He said in 199 Shariah Appellate Benches of the Supreme Court rejected all appeals against the previous and called for the establishment of an interest-free financial system and in 2002 Islamic banking department was established at SBP and Meezan Bank established as Pakistan's first commercial Islamic bank.
Founder Director CEIF said that future of Islamic banking is very bright in Pakistan as overall banking market size is expected to increase by 15pc in next 5 years with high demand for Islamic bankers. "We are expecting that IB will take up the share of conventional banks and all banks will be forced to switch to Islamic banking," he added.
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