KARACHI, Sept 7: Islamic Banking has gradually transformed from a fiction to reality in Pakistan and is slowly moving ahead to become a first preferable choice over conventional banking for businessmen, traders and people at large.

This was the virtual consensus view of the bankers, religious scholars and businessmen at a seminar on ‘’Islamic Banking Investment - progress and potential” held on Friday at the Federation of Pakistan Chambers of Commerce and Industry.

“Islamic banking is a few steps ahead of German-Franco model of banking in which social considerations are given equal weight with profit maximisation,’’ Azhar Qureshi, executive director development finance group of State Bank of Pakistan informed the audience.

He said the Anglo American model was based entirely on profit maximisation for the shareholders and gave least regard to other stakeholders. The Garman-Franco model did give some consideration to other stakeholders with profit maximisation for the shareholders but Islamic banking gives a lot of weight to social stability.

His assessment was that share of Islamic banking was 3.4 per cent at present but he was confident that about 15 to 20 per cent of banking assets will come under Islamic banking by 2010.

The SBP official recalled earlier setbacks in Islamic banking during decade of eighties when a rigid system was introduced with a revolutionary zeal rather than taking an evolutionary path. The rigid system was not compatible with dynamics of the banking market and, therefore, could not make any headway.

Now that there is a regulatory framework in place and banks are offering Islamic banking as a viable alternative and more and more people are participating in the system. What are needed now are innovative banking products and financial services that adhere to Shariah and offer business opportunities.

Zaigham Mahmood Rizvi, the chairman and CEO of House Building Finance Corporation informed the audience that the Riba free system was now maturing, gaining confidence and becoming all pervasive. He pointed out that many were, perhaps, not aware that Riba free financial products were more innovative and are moving from private section to public section.

Mr Rizvi said that Riba free financial products were now moving from Islamic Development Bank to World Bank and International Monetary Fund.

Mirza Ikhtiar Baig, leader of the FPCCI spoke of the limitations of Islamic banking in meeting corporate loan portfolio requirement. He said an average textile company needed about Rs1 billion to 1.5 billion credit every year for various financings. If all these requirements could be met by Islamic banking many businessmen would opt for it.

Mr Zubair Tufail, the vice-president of FPCCI, who chaired the seminar, said that limited number of Islamic banking products for the customers was one of the factors that did not allow full utilisation of potential of Islamic banking in Pakistan.