KARACHI: The State Bank of Pakistan is actively working with the industry and the federal government to develop Shariah-compliant short-term securities.
This statement was made by SBP Governor Syed Salim Raza on Wednesday.
These securities would be issued on a regular basis, he added.
Speaking during a talk on ‘Current Islamic Banking Paradigm and the Way Forward’, Raza said that SBP’s immediate objective was to improve and diversify avenues for short-term liquidity management for the Islamic banking industry.
“Islamic banks in Pakistan have to live with the big constraint of only being able to place their surplus funds with other Islamic banks, in the absence of a suitable investment opportunity,” Salim Raza said.
This market gap both limited earnings and inhibited aggressive deposit mobilisation drives, he added. Raza said that Islamic banking in the country, from a modest start in 2002, made a good progress and achieved a 6 per cent market share.
“The heightened global interest in the subject, particularly after the recent financial crisis, leads one to expect that Islamic banking will make more rapid strides globally and in Pakistan,” Salim Raz added.
He stressed the need of improving understanding among investors of those principles in Islamic finance that provided assurance about risk evaluation, risk management frameworks and practices that improved upon most conventional counterparts.
Dr Umer Chapra, a renowned international scholar on Islamic economics and finance, speaking on the occasion, said that there was a greater acceptability of Islamic finance in the world after the recent global financial crisis.
Delivering a lecture on ‘Current Islamic banking paradigm and the way forward’, he said “Islamic finance is now more respected all over the world because of several economic crisis created by the global financial system in the last four decades.”
He said the recent financial turmoil was the most severe of all involving approximately $3 to $4 trillion in bailout funds. Dr Umer Chapra said that the primary cause of the recent crisis was excessive and imprudent lending by banks which happened because of inadequate market discipline and lack of regulation and supervision.
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