The State Bank of Pakistan (SBP) has revised instructions for banks to expand the scope of operations of Islamic banking windows (IBWs) in order to tap the potential of IBWs in enhancing the share and outreach of Shariah-compliant financial services.
In a statement issued on Wednesday, the central bank stated IBWs could now offer all types of financing products to their customers including corporates, small and medium enterprises (SMEs), agriculture, housing and consumers.
“However, this facility is subject to the condition that the respective IBW branch shall be converted into a full-fledged Islamic banking branch within three years,” it said.
At present, Islamic banking products and services are being offered by full-fledged Islamic banks, Islamic banking subsidiaries and Islamic banking branches of conventional banks after getting approval or licence from the SBP.
Conventional banks can open IBWs, which are dedicated counters in conventional branches, after getting permission from the SBP. However, these were not allowed to offer any financing products.
“With 1,400 IBWs of 11 banks currently operating in the country, their potential to improve access to finance will increase significantly,” the statement added.
“Furthermore, it will contribute towards an increase in financial inclusion through the provision of Shariah-compliant financing facilities to a vast majority of the population.”
The revised instructions also incorporate different amendments or additions to existing regulations and include policy formulation on IBWs, submission of annual IBWs expansion plan, physical setup and display requirements for IBWs, opening and closure of IBWs, their fee structure and revisions in reporting requirements. These revised instructions will supersede all previous instructions issued on IBWs by the central bank from time to time.
The central bank’s new policy measure is expected to contribute towards achieving the targets set under the National Financial Inclusion Strategy for Islamic banking, which envisages attaining a share of 25% in total assets and deposits of the banking industry and 30% share in the total branch network of the industry by the end of 2023.
Published in The Express Tribune, July 30th, 2020.
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