State Bank of Pakistan (SBP) Deputy Governor Saeed Ahmad said on Monday he prays for the replacement of conventional banking with Islamic banking in Pakistan.
Speaking at the launching ceremony of the Introductory Booklet on Islamic Mode of Financing at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the deputy governor said the central bank will soon have dedicated Islamic finance sections in all its departments.
“It is necessary to create awareness (about Islamic banking) among the masses,” he said, adding that its share in Pakistan’s overall banking industry can become as large as 30%.
Deposits of the Islamic banking industry stood at Rs872 billion at the end of the first quarter of 2014, up 23.8% from March 2013. The market share of Islamic banking industry’s deposits in the overall banking industry stood at 10.7% in March, up 1% from the market share of 9.7% one year ago.
“We are working with universities to develop courses for Islamic finance … it will produce a good work force for Islamic banking. Oman, Dubai and many other countries are already hiring Pakistani human resources (for their Islamic banking operations),” Ahmad added.
Noting that the SBP has played a key role in the promotion of Islamic banking in Pakistan, the deputy governor said the central bank has been one of few regulators in the world to issue a comprehensive framework for the development of this sector.
Published in The Express Tribune, August 5th, 2014.
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While encouraging Islamic Banking and finance is a positive sign on the part of SBP, at the same time a more positive role needs to be played by the Islamic banking industry. With an eye on maxmizing returns to the share holders, it is felt in the masses that frequently Sharia principles and regulatory requirements ar overlooked and it Islamic Banking only becomes an exercise in furnishing documentation.
To ensure Islamic Banking is followed in spirit, SBP also need to set up an audit unit which ensures that proper procedures and guidelines are followed by the industry. The current SBP audit teams are same for both Islamic and conventional banks and maybe a more technically sound approach is needed on the part of the SBP.