September 9, 2003	Tuesday	Rajab 11, 1424

Please Visit our Sponsor (Ads open in separate window).

ISLAMABAD, Sept 8: The governor, State Bank of Pakistan, Dr Ishrat Hussain, has stressed the need for fundamental changes in the financial system instead of introducing cosmetic measures such as profit-and-loss system in banks.

He was speaking at the inauguration of a seminar on Islamization of insurance system on Monday.

“We want to provide equality of opportunity to the disadvantaged sections of the society where a large percentage lives below poverty line on the basis of basic principles of Islam which enjoins peace, economic well-being and development of Muslims at all levels,” he said.

The two-day seminar has been organized by the International Islamic Economics (IIIE), International Islamic University and supported by the Islamic Development Bank, Jeddah, on a subject that constituted a ‘missing link’ in the array of services in Islamic financial system.

Welcoming the initiative taken by these organizations, the SBP chief believed that Takaful or cooperative insurance is the right step forward towards the breakdown and removal of mental blocks and bottlenecks in the way of insurance in the Muslim culture.

This type of insurance had great deal to offer in Muslim countries where the spread of insurance per person and per cent of GDP can increase manifold if it is projected correctly and understood properly. In order to create the essential trust and confidence, however, Mr Hussain stressed that the efforts to develop and manage Takaful business “must be genuine”.

Since the establishment in 1979 of the first Takaful company in Sudan, Takaful insurance has been growing at 10 per cent to 20 per cent per annum, compared to world average growth of insurance at five per cent. As such, from $550 million, the life and general insurance business of Takaful industry is estimated to have reached the level of $1.7 billion in various Muslim countries.

Under Takaful mode of insurance, the SBP governor believed that the element of uncertainty would be eliminated as far as subscription and compensation were concerned.

“It does not aim at deriving advantage at the cost of other individuals,” he added.

While it had been offered in some Muslim countries, Pakistan was still at a starting stage, but whatever we do in this direction should be based on “sincerity of purpose”, he stressed.

The State Bank was working for promotion of Islamic banking in a gradual manner and, in this connection, issued license to one Islamic bank which started commercial operations in March, 2002. Besides, approval had been granted for establishment of nine Islamic banking branches of five conventional banks. One of these commenced operations early this month.