Pakistan tightens rules on Islamic banking windows

New requirements come at a time when Pakistan is stepping up efforts to develop Islamic finance.


Reuters March 28, 2014
PHOTO: FILE

KARACHI: Pakistan's central bank has issued new rules for the operation of Islamic banking windows, aiming to strengthen their role in country. 

The new requirements come at a time when Pakistan is stepping up efforts to develop Islamic finance, prompting several banks to expand their operations in the sector.

Banks will have to obtain written approval from the State Bank of Pakistan before opening each Islamic window, as well as providing the regulator with additional details on staffing, training and marketing arrangements.

Islamic windows allow conventional lenders to offer Islamic financial services, provided client money is segregated from the rest of the bank.

As of December, Pakistan's full-fledged Islamic banks had a combined network of 767 branches while conventional banks had 441 Islamic branches and 96 sub-branches, the central bank said.

Different approaches to the Islamic window format have emerged over the years: In Oman, windows are allowed only through standalone branches, while in 2011 Qatar banned Islamic windows outright.

The rules could help consumers better distinguish Islamic financial products from conventional ones, improving the industry's perception and overall uptake.

Regulators in Pakistan hope to expand the industry's branch network and bring Islamic banking' s market share to 15 percent of the system by 2018.

As of December, Islamic banks held assets worth 1 trillion rupees ($10 billion), a 21.1 percent increase from a year earlier and representing 11.2 percent of total banking assets.

Some conventional lenders are also opting to convert their operations into full-fledged Islamic banks.

Last week, the majority shareholder of Karachi-based Faysal Bank said it would convert the bank into a full-fledged Islamic unit in the next two to three years.

And last year, Summit Bank said it would convert itself into a full-fledged Islamic bank over a three- to five-year period. It opened its first Islamic banking branch earlier this month.

COMMENTS (8)

Tahseen Khan | 9 years ago | Reply

@AZ:

Then, my friend tell me the truth, in a culture in which lying is considered smartness, please be the dumb one.

Banks are for profit business enterprise, please explain to me how a Islamic bank makes money? What is the motive of the customer to put money in the bank? If thetre is no interest then why is a bank necessary?

I guess you are victim of Islamicx propaganda machine like so many millions. You have lost the capability of thinking for yourself.

So my friend tell me single truth that I can believe.

Hope to hear from you soon.

Saadat | 9 years ago | Reply

Assalam o Alikum! Please do'nt comment without knowing the truth.Islamic Banking in Pakistan is 100% riba free Banking.

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