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AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS

Event. The 4 th International Conference & Exhibition on Islamic Banking & Takaful 2010. AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS. Topic for Presentation. Islamic Banking In Pakistan - Review and Progress. Date & Venue. November 02, 2010, Expo Centre, Lahore. Presentation by.

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AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS

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  1. Event The 4th International Conference & Exhibition on Islamic Banking & Takaful 2010 AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS Topic for Presentation Islamic Banking In Pakistan - Review and Progress Date & Venue November 02, 2010, Expo Centre, Lahore. Presentation by Prof. Dr. Khawaja Amjad Saeed Professor Emeritus & Founder Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan (2003----), Member Governing Council, International Federation of Accountants (IFAC), New York (1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan (1997-2000), President, Association of Management Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1973-1996).

  2. WELCOME TO OUR PROGRAM • Presentation Frame • A. Islamic Banking-Inretrospect • B. Growth of Islamic Banks • C. IBIs Financing • D. IBIs Investments • E. Selected Performance Indicators: IBIs & Banking Industry • F. Future Outlook

  3. A: ISLAMIC BANKING - INRETROSPECT • Vision and Mission of Islamic Banking Department of SBP • Strategy for Islamic Banking in Pakistan • Historical Rundown

  4. A-1: Vision & Mission of Islamic Banking Department of State Bank of Pakistan (SBP) State Bank of Pakistan, in its role as central bank, has developed the following aspects: 1. Vision “To make Islamic Banking the baking of first choice for the providers and users of financial services”. 2. Mission “To promote and develop Islamic Banking industry in line with the best intersectional practices, ensuring Shariah compliance and transparency”. It is very important that the stakeholders to revisit the above aspects reflected as vision and mission. Motivated by the enlightened guidance provided by State Bank of Pakistan, all Islamic Banks must follow sunshine vision and driving mission. These aspects need to be indoctrinated in the minds of all stakeholders so that their efforts are reflected in real life situation as achievement motivation.

  5. A-2: STRATEGY FOR ISLAMIC BANKING IN PAKISTAN THREE PRONGED STRATEGY In Pakistan, State Bank of Pakistan has followed three point strategy relating to development of Islamic Banks. These strategies include the following: Full fledged banks can be established in Pakistan. Islamic Banks can set up their subsidiaries. Stand-alone Islamic Banking branches opened by conventional banks in Pakistan. Therefore, flexibility exists in respect of starting and expanding Islamic Banks in Pakistan.

  6. A-3: HISTORICAL RUNDOWN 1. Pakistan was created out of Islamic Ideology. Therefore Islamic Banking gets support for its development. 2. Quaide-e-Azam Mohammad Ali Jinnah, father of the Nation, while inaugurating the State Bank of Pakistan on July 01, 1948 had guided Research Department of SBP to help develop Islamic Economic System which is based on equality and brotherhood. 3. Constitution of Pakistan Article 38 (f) of the Constitution of Pakistan is quoted below: “The state shall eliminate riba as early as possible”.

  7. A-3: HISTORICAL RUNDOWN 4. 1970s to 21st Century a. 1970: efforts, in their initial stages, started to eliminate riba. b. 1980s: Bold and comprehensive initiatives were taken. Pakistan joined the race of three countries in the world for interest free banking several existing laws were reviewed. New financial instruments were introduced, Twelve Non-Interest Based (NIB) modes were released to replace riba based practices, Profit & Loss Sharing concept was introduced. c.1990s: Court battles were on instructions were issued by courts for a time framework for implementation of replacing conventional banks into Islamic Banks. However the system did not positively respond for implementation. d. 2000s: In January 2002 Commission for Transformation of Financial System was constituted in SBP. Task Force was set up to suggest ways to eliminate interest from government financial transactions. However, the end conclusion has been to continue parallel banking ie. Conventional and Islamic Banks. This system is going on in Indonesia and Malaysia also.

  8. B: GROWTH OF ISLAMIC BANKS • Important Indicators • Growth of Islamic Banks Branches • Islamic Banking Branches Network • Islamic Banking Branches Network • Full Fledged Islamic Banks • Islamic Branches of Conventional Books • City wise break-up of Islamic Banking Branches • Islamic Banks sub-branches • Maximum & Minimum braches network at Islamic Banks

  9. B-1: GROWTH OF ISLAMIC BANKS: Some Important Indicators December 2003-March 2010 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, P.3. 9

  10. B-2: GROWTH OF ISLAMIC BANKS BRANCHES December 2003-March 2010 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, P.3.

  11. B-3: ISLAMIC BANKING BRANCHES NETWORK As on December 31, 2009 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.16.

  12. B-4: ISLAMIC BANKING BRANCHES NETWORK As on December 31, 2009 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.18.

  13. B-5: FULL FLEDGED ISLAMIC BANKS As on December 31, 2009

  14. B-6: ISLAMIC BRANCHES OF CONVENTIONAL BANKS As on December 31, 2009 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.16.

  15. B-7: CITY-WISE BREAK-UP OF ISLAMIC BANKING BRANCHES As on December 31, 2009 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.18.

  16. B-8: ISLAMIC BANKS SUB BRANCHES As on December 31, 2009 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.16

  17. B-9: MAXIMUM & MINIMUM BRANCHES NET WORK OF ISLAMIC BANKS AS on December 31, 2009 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.18.

  18. C: IBIs FINANCING • Sectoral Composition • Products

  19. C-1: IBIs FINANCING: SECTORAL COMPOSITION MARCH 2010 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, Table 6, P. 5.

  20. C-2: IBIs FINANCING PRODUCTS (Total Rs. 162b) MARCH 2010 Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, Table 5, P. 5.

  21. C-3: IBIs NPFs TIME SERVICES Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, Table 4, P. 5.

  22. D: IBIs INVESTMENT • Composition • Types

  23. D-1: IBIs INVESTMENTS: COMPOSITION Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, Table 7, P. 6.

  24. D-2: IBIs INVESTMENTS TYPES Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, Table 7, P. 6.

  25. E: SELECTED PERFORMANCE INDICATORS IBIs & BANKING INDUSTRY • Capital • Assets quality • Earnings & Profitability

  26. E-1: SELECTED PERFORMANCE INDICATORS: IBIs & BANKING INDUSTRY

  27. E-1: SELECTED PERFORMANCE INDICATORS: IBIs & BANKING INDUSTRY Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, March 2010, Table 2, P. 3-4.

  28. F: FUTURE OUTLOOK • Forecasts • Challenges

  29. F-1: FORECASTS • By 2012, total of Islamic Banking industry is forecasted as Rs. 1 trillion. • In the next five years, 1200 branches of Islamic Banks are vitalized • The hope is that it will be 12% of total banking industry

  30. F-2: CHALLENGES • We visualize the following future challenges: • 15,000 people are needed in the next five years to equip Islamic Banks. In this respect Universities in Pakistan must respond to this challenge. Curricula must be changed in management education. High Education Commission should provide motivation in this respect for Universities to positively respond. • Islamic Banks must demonstrate growth with profitability. The top management must evolve the process to translate the above challenges. • The scope of services for user may be extended to such areas as micro finance, agriculture and small & medium enterprises. This will widen the base of socio-economic development in our country and will address to the two vital issues in our country namely, promotion of employment opportunities and alleviation of poverty. • Sharia compliant financial services be expanded. Awareness be created in this respect and logistics be developed as cushion to achieve the above objective. • Differentiated products be developed. Some Islamic Banks have taken correct initiative in this respect. This areas needs to be logistically well cushioned.

  31. THANK YOU FOR ATTENTIVE LISTENING ASK ANY QUESTIONS

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