DAWN TO DUSK NEWS: islamic banking

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LONDON: A pre-publication copy of the Global Islamic Finance
Report 2014, which is expected to be released on April 13 in Washington DC on
the occasion of the Global Donors Forum, reveals that Pakistan ranks number
nine in the world in terms of development of the Islamic financial services
industry in the country.

A
London-based Islamic financial advisory company, Edbiz Consulting, has
formulated the Islamic Finance Country Index (IFCI), which ranks about 50
countries of the world in terms of their role in developing, promoting and
advocating Islamic banking and finance. Pakistan comes after eight countries,
namely Iran, Malaysia, Saudi Arabia, Bahrain, Kuwait, United Arab Emirates
(UAE), Indonesia and Sudan.

The
Global Islamic Finance Report 2014 estimates the size of the global Islamic
financial services industry at $1.813 trillion at the end of 2013. This
represents 12.3% annual growth over 2012, an increase of $182 billion in
absolute terms.

Many
Islamic financial institutions appear among top five banks in their respective
countries. In Pakistan, the largest Islamic bank is Meezan Bank, which is fast
assuming mainstream prominence.

Growth
of Islamic banking in the country has been over 30% in the last few years,
which is certainly above the average global growth rate of Islamic banking and
finance. If this trend continues, then one should expect that in the next three
years Islamic banking assets will at least double from its current size of
Rs926 billion.

New strategy

The
newly unveiled Islamic banking strategy by the State Bank of Pakistan attempts
to double the number of Islamic banking branches from 1,200 in the next four
years, and to increase its market share from 10% to 15%.

Given
the huge potential the country has in terms of Islamic banking, increasing the
share to 15% is a modest aim. Indeed, if Islamic banking fails to achieve 20%
share in the market by 2018, by all indicators, it has failed to reach its
potential.

Given
that a number of banks are showing renewed interest in Islamic banking, the
industry should target an increase of 2% in market share every year through
Brownfield growth, ie cannibalisation of conventional banking and through
conversion of conventional into Islamic banks.

Once
Summit Bank is converted into a full-fledged Islamic bank, it will become the
second largest Islamic bank in the country, taking the number two position from
BankIslami (assuming that BankIslami does not grow further). Only this will
give 8% additional market share to Islamic banking over the next four years.

If
Islamic banks exhibit Greenfield growth, more than the growth in conventional
banking, it should be able to double its market share. Greenfield growth is not
only possible but is in fact needed in Pakistan where there is widespread
financial exclusion.

If
Islamic banking is used as a tool for promoting financial inclusion, there is
no reason that Islamic banking should not be able to achieve the important
milestone of 20% market share.

If
that happens, the country will stand next to a number of Gulf countries and
Malaysia where Islamic banking represents between 20% and 30% of the market
share. Pakistan, however, will become the most important player in Islamic
banking and finance, if it attains 20% market share. This is so because the
country is the second largest Islamic market (population-wise) after Indonesia.

Islamic finance

Country 
               
               
IFCI Rank

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Posted By::: Muhammad usman</div>

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Growth of Islamic banking and finance in Pakistan

LONDON: A pre-publication copy of the Global Islamic Finance Report 2014, which is expected to be released on April 13 in Washington ...