On the inaugural day of a recent conference, Dr. Miftah Ismail Adviser to the Prime Minister on Finance and Economic Affairs said the Ministry of Finance would soon set up a separate division for the promotion of Islamic banking in Pakistan. He was the Chief Guest at a two-day World Islamic Finance Forum (WIFF-2018). The international forum was organized by Institute of Business Administration’s Centre for Excellence in Islamic Finance IBA-CIEF in collaboration with key partners. The theme was “Expanding the Footprint of Islamic Finance: Innovation, Fintech and Regulations.”
In his visionary note, Shaikh Muhammad Taqi Usmani Chairman, Shariah Board of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) said the people of Pakistan origin were holding key positions in Islamic banking industry around the world, making contribution in developing regulatory framework and above all developing products that would meet the emerging needs of trade and industry. He urged the government to take concrete steps for making the economy Riba (interest) free. He also pointed out that Islamic financial institutions have ample liquidity and the government should work for creating new avenues for its deployment in remunerative options. He suggested that the ruling party should also include in its election manifesto that Riba would be eradicated totally from economy at the earliest.
Chairman AAOIFI Board of Trustees, Bahrain Shaikh Ebrahim Bin Khalifa Al Khalifa said it was heartening to note that Pakistan was striving to become another hub of Islamic finance. The country has all the basic ingredients — a population of 200 million predominantly Muslims, a robust banking and finance sector, vibrant agriculture, industrial and services sectors.
On the occasion were present the top officials of the apex regulators – State Bank of Pakistan (SBP) and Securities & Exchange Commission of Pakistan, Deputy Governors of the central bank, Jameel Ahmad and Shamsul Hasan talked about the central bank’s initiatives for the to promote Islamic banking in the country. The progress made over the last decade has been encouraging that has facilitated in achieving the target. They were also of the view that making Pakistan hub of Islamic finance would not be difficult.
Irfan Siddiqui, President Meezan Bank requested the federal government to set a target to acquire at least 25 per cent of the local funding through Islamic banking as Islamic financial institutions have ample liquidity and limited avenues for investment.
In his key note address, Dr. Ishrat Husain, Chairman, IBA-CIEF talked about the progress made by Islamic banking in Pakistan. He was of the view that the progress made during last one decade was enormous but new products need to be introduced to provide fresh impetus for growth.
IBA-CEIF Director, Ahmed Ali Siddiqui, welcoming the delegates, said the Centre had emerged as a regional platform for excellence in Islamic finance. He said focus areas of CEIF included development of Islamic finance professionals and new human resources talent pool through industry linkages and international collaborations.
Two of the closed-door meetings deserve special mention, though details discussed were not made public. In the first session players and regulators discussed details that could help in making capital market and mutual funds Shariah compliant. The issue of financial inclusion and outreach were the two important themes to be discussed at length. The second session was between Sharaih scholars and regulators for evolving regulatory frame work that can help in developing products to meet the needs of different income strata and those having different risk appetite.
Yet another initiative was presentation of research papers discussing contemporary issues. One of the sessions deserves a specific mention where lending to farmers was discussed. At present bulk of the loans are extended to farmers against passbook or the landownership document. This process mostly benefits the feudal lords. In this discussion the issue of warehouse receipt financing was also debated. However, it was evident that unless modern warehouses and collateral management companies are established warehouse receipt financing may not be possible. Authors of selected papers were awarded cash prizes.
The takeaways of the concluding remarks of Dr. Ishrat Husain were: 1) creation of Shariah Board at Ministry of Finance, 2) borrowing for infrastructure development projects through flotation of Rupee and Dollar denominated Sukuks, 3) focus on the development of Fintechs for extending outreach of banks and ensure financial inclusion and 4) development of alternative delivery channels.