The State Bank of Pakistan (SBP) governor has urged the country’s Islamic banks to develop ways to reward their customers in line with a surge in the sector’s profitability, or face regulatory action.
Islamic finance is experiencing a revival in the country, aided by an ambitious five-year plan that regulators hope will double the industry’s share of the banking sector to 20% by 2020.
A growing client base and improving asset quality helped Islamic banks post profits before tax of Rs12 billion in the third quarter of last year, almost double the year-earlier amount, central bank data shows. But regulators want to tackle consumer perceptions that Islamic banks falter when it comes to social responsibility and ethical banking practices.
The average financing-to-deposit spread – the difference between what banks charge for financing and what they pay their depositors – for all lenders, Islamic and conventional, remains high and should be “reasonably rationalised,” State Bank Governor Ashraf Wathra said in a speech to a gathering of industry executives on Monday.
Published in The Express Tribune, January 30th, 2015.
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