Al Baraka to enter mutual fund industry in June

Bank to also launch Takaful business before year-end.

KARACHI:

Al Baraka Pakistan Limited (ABPL) will enter the mutual fund industry by June this year and funds will be established in collaboration with a well-established fund manager, ABPL President Shafqaat Ahmed revealed while talking exclusively to The Express Tribune.

“We will gradually introduce some innovative products through a joint venture  after launching the first fund in June this year,” he said.

He expressed optimism about the new venture, saying, “We have a widespread network of bank branches and a customer base that has exceeded 115,000, which can be used as stepping stones for expanding into the mutual fund industry.”

Ahmed highlighted that the growth of Islamic income funds has outpaced the growth of the overall mutual fund industry in recent months.

He also revealed that ABPL will launch its Takaful business before the end of the current calendar year.

ABPL emerged as a scheduled bank in the country on November 1, 2010, after Emirates Global Islamic Bank Pakistan merged with Al Baraka Islamic Bank Bahrain. Prior to this union, the bank had operated in the country for the Bahrain-based entity.

Highlighting the bank’s plans for future growth, Ahmed asserted, “we will focus heavily on the agricultural sector and rural societies because we believe there is immense potential for bringing the unbanked population into the fold.”

He asserted that bigger banks have primarily catered to landowners with large estates, but added that due to political influences, the same recipients have often defaulted on loans with immunity. “Smaller growers have the capability of utilising funds well if they receive terms that meet their needs,” said Ahmed.

Acknowledging that economic growth had dwindled in the past 24 months, he pointed out, “recovery in the agriculture sector typically takes lesser time than industries and the agriculture sector has often supported the economy when the formalised sectors were suffering.”

Ahmed said that the Al Baraka Group (ABG) has shown strong commitment to Pakistan in previous years and would continue to invest in the country as opportunities arise. The small and medium enterprises (SME) sector holds attractive opportunities and ABPL is considering strategies to extend services to SMEs.

“Energy crisis and deteriorating law and order have limited the otherwise immense growth potential of the economy,” Ahmed said and urged the government to prioritise these issues and seek sustainable solutions to encourage business activity.

“Improving the country’s perception abroad is crucial for attracting investments,” he said while urging the media to play a positive role on this front.

Responding to a question regarding recent changes in liquidity requirements for Islamic banks, Ahmed said, “higher statutory liquidity requirements (SLR) for Islamic banks will be easily met by most existing entities.” He pointed out that Islamic banks are already maintaining large reserves in cash and Sukuk investments because they do not deal in bonds, adding, “Ijara Sukuk is counted in SLR criteria so it is not an issue for most Islamic banks, including ABPL.”

Regarding successively increasing minimum capital requirements, he said, some of the smaller banks may face problems, but the regulations would improve the quality of banking in the country and force smaller and weaker players to merge with more established entities.

Published in The Express Tribune, March 8^th, 2011.