Demand of Sukuk is witnessing a gradual increase in the country and if the current rate of growth in the Sukuk bond continues, the annual issuance of Sukuk would reach Rs 100 billion mark in 2009, said Najmul Hasan, Head of Corporate and Business Development, Meezan Bank, while talking to Business Recorder.
He said that in 2007 alone Meezan Bank had participated in Rs 57 billion worth of Sukuk financing that showed rising demand of Sukuk in the industry.
"All sectors are adopting Islamic mode of financing. However, power, steel and real estate sector are the major borrowers of these Sukuk issued by the Islamic banks", he said.
He said that a large of number institutions have switched to Islamic banking. At present over six Islamic banks are operating across the country, besides the Islamic branches of different conventional banks. It is expected that Sukuk financing would cross Rs 65 billion during calendar year 2008, he said.
He said that the current poor law and order situation across the country can hurt foreign investment in financial sector and affect the growth of banking sector, although the banks are ready to face the situation. "However, we believe that things would settle in near future, as this is a temporary issue, which would be resolved," he opined.
Islamic banking growth would not be hurt by the current stagnant political position, as it has a lot of opportunities for the growth. However, it is expected that it would hurt the overall banking sector in some way, he added.
Najmul said that the whole economy including the banking sector is depending on the coming general elections and if peaceful elections took place, the economic growth would continue.
He said that government policies are in the right direction and attractive for new foreign investment in the financial sector. SBP policies for financial sector including Islamic banking are transparent and in the right direction, which helps us to promote Islamic banking in the country, he added.
He said that SBP has played a vital role in the current growth of financial sector and also played a positive role to attract huge foreign investment in Pakistani financial sector. State Bank of Pakistan has also ensured good governance in the financial sector, which helped the financial sector to grow and attract the foreign investors to invest in Pakistan.
Islamic banking has very strong competition with the conventional banking but despite the tight competition the Islamic banking has managed to achieve four-percent share in the overall banking industry during the last six years. He said if current ratio of growth continues in Islamic banking it is expected to achieve 12 percent market share in the overall banking industry by 2012.
He said that Meezan Bank annual growth has been over 60 percent during the last five years and its branch network has reached to 100 branches in just five years period.
The bank is planning to take the branch network to 150 branches by the end of 2008, he added. He said that after witnessing the steep growth of Islamic banking, conventional banks are also compelled to start Islamic banking windows to get their share from the rising demand of Islamic banking in the country.
About non-performing loans (NPLs) of Mezan Bank, he said that his bank''s NPLs are under control and the default ratio is also lower than other banks. "Overall, non performing loans of Meezan Bank stood at 1.5 percent, which is lowest in the banking industry", he added.
He said that despite the fact that some banks have faced huge losses in car financing and have stopped it, Meezan''s ''Car Ijarah'' was continuing and its default ratio was less than one percent. He said that Meezan Bank''s consumer financing stood at Rs 7.5 during the current fiscal year and it is rapidly increasing.