By Kazim Alam, The Express Tribune
KARACHI: There are five full-fledged Islamic banks in Pakistan while 14 conventional banks offer Shariah-compliant banking services through their Islamic windows.
Growing at an annualised rate of roughly 30% over the last eight years, Islamic banking assets were still Rs847 billion, or 8.7% of the total assets of the banking industry, at the end of March 2013. But given the huge potential in the market for Shariah-compliant banking, the industry should be growing at a much faster rate, said State Bank of Pakistan (SBP) Islamic Banking Director Saleem Ullah.
He was speaking here on Thursday at the formal launch of a media campaign to create awareness of Islamic banking.
Saleem said the first phase of the campaign aims to improve “visibility and presence” of Islamic banking in society while subsequent phases will spread its concepts in detail through TV and radio ads and newspaper supplements.
At the end of first quarter of 2013, deposits in the Islamic banking system were Rs704 billion, up 32.8% from the corresponding period in the preceding year.
Saying there are currently 1,100 bank branches offering Shariah-compliant services in over 100 cities, Meezan Bank CEO Irfan Siddiqui observed that Islamic banking has brought those people into the fold of formal banking who previously stayed away from it due to religious reasons.
“People would ask us whether Islamic banks were regulated by the SBP. But with the launch of this campaign in collaboration with the SBP, the central bank is actually telling people that it regulates Islamic banks,” he said.
Siddiqui noted that the biggest challenge for Islamic banks was to manage excess liquidity in the short run because of the absence of Shariah-compliant treasury bills, alternatively called short-term sukuk. He also demanded that the SBP set up a separate Islamic discount window.
Speaking on the occasion, SBP Governor Yaseen Anwar said the Islamic banking industry will try to achieve a market share of 15% in the overall banking system in the next five years under a new strategic plan.
“In the post-financial crisis period, Islamic banking has proved itself as a viable alternative to conventional banking,” he said.
Published in The Express Tribune, July 19, 2013.