The two-day World Islamic Finance Forum (WIFF) concluded here Tuesday with the resolve to make Islamic banking the ultimate banking solution for economy, industries and individuals in Pakistan. The high-powered conference was organized by Centre for Excellence in Islamic Finance (CEIF), established at the Institute of Business Administration (IBA), Karachi in collaboration with the International Centre for Education in Islamic Finance (INCEIF) (Malaysia).
Finance Minister Ishaq Dar, Shaikh Muhammad Taqi Usmani, Ashraf Mehmood Wathra Governor State Bank of Pakistan (SBP), Dr Ishrat Hussain Chairman CEIF-IBA, Chairman SECP Dr Zafar Hijazi, Saeed Ahmed Deputy Governor SBP, Ahmed Ali Siddique Director CEIF, Dr Farrukh Iqbal Dean and Director IBA, Dr Azmi Omar Director General Islamic Research and Training Institute (IRTI), Professor Datuk Dr Syed Othman Alhabshi, Deputy President Academic INCEIF, Irfan Siddique President Meezan Bank Limited, Hasan Bilgram President BankIslami Pakistan, Professor Dr Abbas Mirakhor, First Holder, Chair of Islamic Finance INCEIF were amongst the key note speakers at the conference.
Governor and Deputy Governor Central Bank, foreign delegates and other participants also witnessed the launch of the First Islamic Finance Country Report developed by CEIF in collaboration with IRTI and Thomson Reuters. Addressing the conference, Ahmed Ali Siddiqui, Director CEIF-IBA said within a short span of less than a year, CEIF has made remarkable progress through strong industry linkages with leading local and global players and institutions.
"At CEIF, we are engaged in conducting awareness programs, professional trainings and doing practical and meaningful research and now will be offering academic degree programme," he added.
The CEIF is now hosting WIFF for the first time in Pakistan, a unique platform where industry leaders and top academics will interact to generate innovative ideas that can act as a catalyst for growth of Islamic finance globally, he mentioned. Ahmed said IBA-CEIF with the support of all stakeholders would strive to take Islamic finance to the next level. He hoped that WIFF will contribute to develop a roadmap to convert the economy of Pakistan Riba-free, a task that can be done with commitment and combined efforts in a few years.
Some thought provoking arguments were presented by the industry leaders. Irfan Siddiqui, President of Meezan Bank, which is the largest Islamic bank in the country, stressed the need for technology given digital disruption.
With alternative non-banking payment systems growing across the globe, smartphone banking is the need of the hour, he said. Irfan said there is resistance from customers in terms of sharing profits under Musharika modes of financing. Rafe Haneef, CEO of CIMB Islamic Bank, presented some interesting arguments. He said that 35 years ago Islamic finance was a disruptive play moving from risk transfer to risk sharing.
However, having failed to do so, it turned out to be a submissive play. In his view, it would remain so under state protection for deposits and central bank role as the lender of the last resort. "Now conventional banking has been disrupted by cheaper, better and faster Fintech solutions," he added. Peer to peer lending although has grown at a CAGR of 130%, is still 1% of the banking sector. According to Rafe, it would grow to a maximum of 5%, not creating much disruption for banking players, given state protection for deposits available at banks.
Rafe talked about the 3I phenomena, ie, Imitate, Improve and Innovate. Islamic finance industry is still trapped in the imitate phase. Even the imitated products are expensive and laden with documentation. "Sales target should not be product-based but should be dollar-driven to stimulate product development. Product innovation through collaborative models should be considered seriously by Islamic banks," he added.
Rafe said banking will be completely transformed in next 10 years with banks being forced to follow complex risk management frameworks such as BASEL III. Ashar Nazim, Partner Ernst & Young, emphasised the need for simple, effective and accessible solutions. He highlighted the importance of data sciences which are at the heart of wealth management, payment and financing solutions.
Unlike the past when wealth was managed by likes of UBS with a minimum ticket size of US $1 million, new players like Nutmeg and Rob adviser are catering to ticket size of as small as US $100. With non-banking payment systems available, remittance cost has come down by a significant 80 percent, he added.