State Bank of Pakistan (SBP) Deputy Governor Saeed Ahmad has said Islamic finance is going to become a better alternative to conventional banking.
Addressing a ceremony to mark the completion of 10 years of ‘Raast Islamic Banking programme’ of Bank of Khyber (BoK) on Saturday, Ahmad said the demand for Islamic banking will continue to grow in the coming years.
“Given its global outreach, growing recognition as a stable system, and its ability to provide financial solutions to all business needs, Islamic finance is all set to establish itself as a better alternative to the conventional financial system,” he said.
He noted the global financial crisis in 2008-09 made western financial experts look for an alternative under which the international financial system could overcome the weaknesses of the conventional system, which is based on a fixed, predetermined return in the form of interest.
“The search was for a system that leads to equitable treatment of all stakeholders under all circumstances. A lot of attention was focused on solutions, which are not far from Islamic financing where system allows fairness of return, sharing of risk and reducing income inequalities,” he said.
He said Pakistan was among the first few countries that undertook the ambitious aim of Islamising the banking system. Significant efforts towards this end were made during the 1980s, he said, adding that it went through a rough ride until 12 years ago when the SBP allowed three types of Islamic banking institutions i.e. full-fledged Islamic banks, Islamic banking subsidiaries of conventional banks and Islamic banking branches of conventional banks. Moreover, conventional banks having Islamic banking branches were also allowed to have Islamic banking windows in their conventional branches, he added.
Speaking on the occasion, Khyber-Pakhtunkhwa Chief Minister Pervez Khattak appreciated BoK management for increasing the branch network across the country. Khattak also invited the Karachi business community and participants of the conference to visit K-P to witness the drastic change that the province had undergone in the last 10 months.
BoK Shariah Supervisory Committee Chairman Mufti Muhammad Zahid presented a detailed paper on the prohibition of interest in Islam and other religions. Islamic scholar Muhammad Ayub presented a paper on the philosophy of Islamic banking and its future while financial markets professional Umar Mustafa Ansari made a presentation on governance in Islamic banking and finance.
Published in The Express Tribune, April 6th, 2014.