While the coronavirus outbreak is threatening businesses around the world and economies are also witnessing a slowdown, banks and financial institutions in Pakistan remain functional as a fundamental support for the economy.

Talking to Business recorder Syed Amir Ali President & CEO BankIslami said that due to Covid-19 pandemic overall businesses and economic activities are slowing down, productivity is decreasing and other factors are also showing a downturn globally as well as on domestic front.

All these factors have also reduced the debt payment capacity of the borrowers and it seems that in this situation borrowers may not be able to pay off their loans timely over the next few months, he added.

Realising this situation, the State Bank of Pakistan (SBP) with consultation of banking industry has taken some timely measures to facilitate the borrowers by restructuring of loans and other flexible repayment options to make sure the economic activities remains intact, he said and added, "It is imperative for us to do our best in controlling the humanitarian crisis because if we don't, the economic impacts will be so enormous that will be hard to curtail."

He also appreciated the SBP's role in this crisis and said that the SBP's relief measures for the banking customers, exporters and industries will provide maximum support for a sustainable economic cycle. Although, bank and financial institutions are also facing multiple challenges, they are fully supporting the SBP's measurers in the larger interest of the country, he said.

"We have to realise that this is a disease-based crisis and not an economic downturn. The economy is going to take an impact because of the closure of businesses like steel mills, textile mills and other such industries and this crisis can lead to potential Non Performing Loans (NPLs), if mismanaged," he added.

He said that banks may also face some challenges on profit side due to Covid-19 pandemic as loan payment will be delayed and banks will be required to provide some markup relief to their borrowers.

"Despite relief measures, there would be some increase in NPLs and its provisioning may lead to hit the profitability of the banks. Therefore, there is need that banks should be proactive to manage this crisis and actively work with customers that are facing problems in this situation," he said.

President BankIslami said that some decline in profits in a crisis on cost of services to society is no big deal and it is an ethical responsibility all of us to support each other in this time of need.

He mentioned that State Bank is already taking a number of measurers to facilitate investors, borrowers and businessmen in the wake of Covid-19 pandemic. Hospitals and medical centres are being provided concessional loans for import of necessary medical equipments to combat against this disease.

Under a relief package for borrowers and customers, Banks and DFIs can defer the payment of principal amount on loans by one year to cope with impact of Covid-19 pandemic. In addition, limits of exports related loans have been enhanced to facilitate the export sector and SBP is offering loans at 7-8 percent for those companies, whose expansion plans have gone on hold.

SBP has also asked banks for taking steps to promote digital payments platforms in wake of Covid-19 to minimise the branch visits of the customers, Amir said and added that interestingly, BankIslami is already a leader in the promotion of digital banking in Pakistan.

BankIslami has the honour to introduce a number of innovative financial and technologically advanced products such as Linux based desktop computing in Banks, Biometric authentication on ATMs and One Touch Banking, where you don't need your ATM card to withdraw fund from ATM, Amir informed while speaking about the digital payment systems, he mentioned. He said that customers of BankIslami can also perform transactions such as Fund transfer, online transfer to other banks over the branch counter through One Touch Banking.

"We have made tremendous progress in developing robust digital payment ecosystems across the country. As part of these efforts, this year, BankIslami has aggressive plans in bringing 'customer centricity' by collaborating with fintechs to enhance customer experiences and catering to their needs of sending and receiving payments C2C and C2B via mobile apps and Internet Banking," BankIslami President said.

Replying a question about the Islamic banking industry, he informed that the Islamic Banking sector saw exceptional growth in fiscal year 2019 with overall industry growing by 20 percent and deposits showing a surge of 9.5 percent over the previous year. BankIslami has also performed well and posted 24 percent growth in deposits with Rs1.1 billion profit during the last year (CY19), he added.

Amir said that considering the current financial inclusion level of around 20 percent in Pakistan there is tremendous potential for Islamic Banking Industry to grow more. However, it will largely remain dependent upon branch expansion, product offering, marketing and public awareness strategy of Islamic Banks as a whole and issuance of Shariah Compliant instruments to support expansion of asset base of Islamic Banks.

Talking about the bank performance, he said that BankIslami has become a key player in the rapidly growing Islamic banking space and presently has presence in more than 114 cities of Pakistan through 340 plus branches making it the second largest Islamic Bank in the country with respect to number of branches.

"Overall growth in Balance Sheet and Profitability was a result of our effective mobilisation strategy through optimal allocation of resources and underwriting on the back of a well spread branch network, product suite, extensive marketing activity and favourable movement in benchmark rates. These measures demonstrate that BankIslami is moving in the right direction and its growth trend is in-line with the overall growth witnessed by the Islamic Banking industry," he mentioned.

He informed that BankIslami envisages growth in its assets going forward and to sustain this, the organisation plans to maintain a robust capital base. In accordance with its plans, the Bank has successfully completed issuance of its Right Shares to the tune of Rs1 billion and is in process of issuing Pakistan's first ever Islamic Additional Tier-1 (ADT-1) Perpetual Sukuk Instrument with a capping of Rs2 billion, out of this, Rs1.7 billion has already been raised by the bank during the Pre-IPO phase.

CEO BankIslami said that this instrument is unique in nature and has been branded as "Ehad Sukuk" which is in conformity with BankIslami's commitment to offer authentic Islamic Banking products and provide Halal returns to Sukuk investors, thus making these investors partner in Bank's future growth and advancement.

"BankIslami has adopted a two-pronged strategy to bring the unbanked population of the country under the umbrella of financial inclusion. Firstly, we have embarked upon an initiative, i.e. the National Financial Literacy Programme (NFLP) that is being led by State Bank. Under this programme, we are dedicating human capital to areas which are impoverished in terms of financial literacy," he informed.

Secondly, BankIslami is allocating resources in the far-flung corners of Pakistan to promote Islamic Banking in particular and financial inclusion in general. Under this novel initiative the bank will be hiring and deputing Rural Business Development Officers to unbanked remote areas of the country.

With this scheme, BankIslami not only providing employment opportunities to the youth in remote areas of Pakistan, but also increasing the financial inclusion numbers of Pakistan at the same time, Amir said.