The assets in Islamic banking have doubled from 2012 to 2016, jumping from Rs 837 billion to Rs 1.6 trillion, now accounting for 11.7 per cent of the total banking assets. There is an even stronger growth of Islamic assets in the non-bank financial institutions (NBFI). Their market share is now approaching 33 per cent from only 14 per cent in 2012. Two reasons that help explain this growth are demand from customers and enabling regulations by the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP).
This growth in Islamic finance and the role of regulation was highlighted at a seminar at the SECP's head office. Speaking on the occasion, Usman Hayat, head of the Islamic Finance Department at the SECP, explained that developing Islamic capital market is a priority of the regulator. The SECP has recently conducted two consultation sessions with market participants to facilitate issuance of sukuk and real estate investment trust (REIT).
The SECP is analyzing the industry's proposals and it shall consider making appropriate amendments to the relevant regulations, further reducing the cost and hassle for both issuers and investors. The industry proposals pertaining to tax issues regarding sukuk and REIT are being referred to the FBR. Ghulam Muhammad Abbasi, head of the Islamic Banking Department at SBP, made a comprehensive presentation on the evolution of Islamic banking in Pakistan. He highlighted the fact that after a prolonged debate about which model to follow, policymakers decided in 2001-02 to allow both Islamic and conventional banking in parallel.
At present, 21 banking institutions are offering Islamic banking services in the country through 2,322 branches in 112 districts across the country. The SBP has a holistic approach to the promotion of Islamic banking and is providing enabling policy environment, Sharia governance, risk management, and capacity building. He pointed out that the SBP was voted as the "Best Central Bank for Promoting Islamic Finance" by Islamic Finance News in 2015.
Dr Shafiullah Jan, from IMSciences, said that the economic substance in Islamic banking may seem to be the same as that of conventional banking, but the underlying process is different. Along with the growth of the industry, more attention needs to be paid as to why this industry was created and if it is delivering on the Islamic vision of development that it is associated with.
The SECP organised the seminar in collaboration with the SBP and the Center for Excellence in Islamic Finance at the IMSciences Peshawar. Representatives of the SECP, SBP, Ministry of Finance, Zarai Taraqiati Bank, Central Directorate of National Savings, and the faculty and students from IMSciences attended the event.-PR
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