Progressive vision for Islamic Banking promotion in Pakistan.

Byline: Syed Fazl-E-Haider

Present government led by Prime Minister Imran Khan is committed to Islamize the financial system of Pakistan and promoting Islamic banking. The State Bank of Pakistan (SBP) is playing a pivotal role for strengthening the regulatory and Shariah compliance framework for Islamic banking industry. Several steps have been taken for implementation of Musharakah and Modaraba modes of financing to be adopted in the country.

A comprehensive legal framework has been established for Modaraba financing by Securities and Exchange Commission of Pakistan (SECP) and several laws supporting Musharakah have also been enacted, according to the Federal Minister for Economic Affairs, Hammad Azhar. Some of the key initiatives taken by SBP for the promotion of Islamic banking industry include introducing licensing requirements on Shariah compliance, rationalisation of Minimum Capital Requirements (MCR) for Islamic banking subsidiaries, Shariah supervisory and compliance framework, liquidity management solution for Islamic banking industry as well as other measures.

Islamic banking has been a high priority area for the central bank and it has taken steps to make Islamic banking industry robust enough to offer a viable alternative to conventional banking. The SBP is striving for developing a progressive and sound Islamic banking system compatible with the global financial sector, providing innovative Shariah compliant products and services so as to achieve equitable economic growth. Established in September 2003, the Islamic Banking Department has been entrusted with the huge task of promoting and developing the Shariah compliant Islamic banking as a parallel and compatible banking system in Pakistan.

Islamic banking is one of the emerging fields in global financial market. It is growing at very fast pace all around the world. Pakistan needs to follow other Muslim countries to expedite growth in Islamic finance.

For example, Turkey made it a strategic government priority to tap potential of Islamic finance industry and it took initiatives to give incentives such as relaxed banking provisions to enhance the growth of the Islamic banking sector. Similarly, Qatar is thinking of establishing specialized Islamic banks focused on areas like energy, sustainable investment, and venture capital to attract more international business to Qatar. Qatar's total Islamic finance assets constitute 33% of the nation's total financial system assets.

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