Muslim demography: Promoting high-net-worth individuals in Pakistan

Published: May 3, 2015
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Country should develop vibrant Islamic asset, wealth management business. CREATIVE COMMONS

Country should develop vibrant Islamic asset, wealth management business. CREATIVE COMMONS

LONDON: There are various estimates of global Muslim population, ranging from 1.6 billion (Pew Research Centre) to 2.08 billion (www.muslimpopulation.com).

According to these estimates, Muslims account for 23% to 28% of mankind. Whatever be the health of these estimates, it is realistic to assume that every fourth person on the planet is Muslim. However, the vast majority of them happen to be among the poorest in the world. An estimated 40% of the population in the OIC block lives under poverty line.

However, there is a growing middle class in the Muslim world, including Pakistan, of which the upper sub-segment called the ‘mass affluent’ may potentially be relevant to wealth creation and subsequently to the business of wealth management.

According to Net World Wealth, Islamic wealth is estimated to be $11.3 trillion, which is only a fraction of the global wealth of $107.3 trillion. The private wealth held by high-net-worth individual (HNWI) stood at $57.83 trillion at the end of 2014, and can easily reach the mark of $60 trillion by the end of 2015.

Pakistan’s position in Islamic wealth

Muslims are the second largest faith group holding the global wealth, trailing Christians. Muslim HNWIs hold an estimated $3.35 trillion, which is less than 30% of the total Islamic wealth. The remaining 70% is held by Muslim businesses, Islamic financial institutions, the mass affluent, and by the governments in the OIC block.

Where does Pakistan stand in this respect? It is interesting to note that there are not very many HNWIs reported in Pakistan, although the Muslim population in the country is estimated to be 160 million. The top 10 rich Pakistanis include those who are now no longer residents in the country. For example, Shahid Khan, a US-based billionaire with Pakistani origin, is included on the top of some of the popular rich lists in Pakistan. However, he has almost no exposure to Pakistan business.

Like any other developing country with under-developed capital markets, there is only one asset that has so far been used in Pakistan by the mass affluent for wealth management, i.e., the real estate. Although only two of the top 10 rich Pakistanis have real estate development as their primary business, almost all of them have significant exposure to the sector.

Introducing Islamic wealth management

Wealth management is a rudimentary business in Pakistan. A culture of professional wealth management has yet to develop in the country, although some banks offer wealth management products and premier banking services to their wealthy customers.

However, with the increase in the mass affluent class, there is huge scope for asset and wealth management business in the country. Given that Islamic banking and finance is fast assuming mainstream importance in Pakistan (with 11% market share), there is huge scope for Islamic wealth management in the country.

Many wealth managers would dispute the use of a term like “Islamic wealth management” because, according to them, the fundamental principles of wealth management are universal, applying to persons of all faiths.

Whether it is just nomenclature or a matter of identity, it cannot be denied that there is growing focus on wealth management in the global Islamic financial services industry. It must be clarified that although Islamic wealth management reflects an Islamic identity, it can be practised by anyone – Muslims and non-Muslims alike.

The likes of Meezan Bank and Bank Islami have already started offering Islamic wealth management solutions to their high net worth clients, and with the patronage of government bodies like Ministry of Religious Affairs and Inter-faith Harmony, this practice should further flourish.

The said ministry has to date been lukewarm in responding to the need of Shariah compliant asset management for the surplus funds held by it during the application process of hajj – annual pilgrimage to Makkah and Medina in Saudi Arabia.

Historically, the designated banks have invested the funds collected from prospective pilgrims on an interest basis, on the premise that there were no Shariah compliant opportunities available.

However, now that a number of Islamic banks and conventional banks with Islamic windows have the capacity to invest such funds in compliance with Shariah requirements, it is peculiar that the officials of the Ministry of Religious Affairs and Inter-faith Harmony have yet to come up with Shariah guidelines for investing such funds.

In Malaysia, Tabung Haji, a government-owned institution, has developed a comprehensive model of hajj administration and has indeed served as a catalyst for development of Islamic banking and Shariah compliant asset management in the country.

Pakistan needs to study that model to develop a vibrant Islamic asset and wealth management business.

The writer is an economist and a Phd from Cambridge University

Published in The Express Tribune, May 4th,  2015.

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Reader Comments (2)

  • Sazid Khan
    May 4, 2015 - 10:17AM

    OIC ( Organization of Islamic Cooperation) includes 7 Countries (Mozambique,Benin,Togo,Uganda,Suriname, Sierra Leon,Ivory Coast ) where Muslims Population are less than 20% Apart from Nigeria and Chad where Muslims are 50% but Still this Countries are Part of OIC..The together Population are more than 20 Crores and This Countries 65% of its Population Live below Poverty line and their Literacy rate are average 60%.. OIC average living below Poverty Line rises to 40% because of this Countries and in absolute Number the Figure is stable..OIC also raises its Poverty level from $3 to 25$ Per day for the developing economies..but this Countries still trailing less than $2 Per day..Recommend

  • optimist
    May 4, 2015 - 3:53PM

    Again it is a question of quality, not quantity.
    .
    I believe 3 or 4 Muslim countries can achieve much more than relying on the whole Ummah. It is like focusing on cream students to improve results.
    .
    Pakistan, Turkey, Indonesia and Malaysia need to make their own ‘Silicon Valley’ where we create projects like Facebook, Ebay, Skype, Amazon and where we develop our own email system, rather than relying on gmail (and compromise security). These countries are much better when it comes to Technology than other Muslim countries and they have population that is large enough (approx 550 Million) to make projects commercially viable.
    .
    To start with, this ‘Silicon Valley’ can be located in Malaysia or Turkey due to their image advantage and some smaller branches in Indoneisa and Pakistan (for outsourcing less technical work). All four countries need to put aside $1 billion each for a year. It is knowledge based technical industry that can save us and make us rich (we can start making profit in only few years). Recommend

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