Dar urges Islamic finance industry to expand its reach

Published January 10, 2015
ISLAMABAD: Finance Minister Ishaq Dar addressing a seminar on Islamic finance on Friday.—PPI
ISLAMABAD: Finance Minister Ishaq Dar addressing a seminar on Islamic finance on Friday.—PPI

ISLAMABAD: The Islamic finance industry in Pakistan is well below its true potential and Islamic banks must tap into the unbanked markets through their asset-based and risk-sharing products for catalysing growth in the real economy, said Finance Minister Ishaq Dar on Friday.

“Only 20 per cent of farmers have access to the formal financial system while just 5 to 6pc of SMEs have access to bank financing. The Islamic finance industry now constitutes over 10pc of the country’s financial system and maintains strong growth momentum,” Dar said at the launch of the third round of ‘Financial Innovation Challenge Fund’ on promoting excellence in Islamic finance by the State Bank.

The finance minister emphasised the linkages between Islamic banks and micro-finance institutions in channelling the surplus liquidity of Islamic banks towards meeting financial services needs of low-income population of the country, he noted.

The Islamic finance industry in Pakistan needs trained human resource in order to realise the true market potential and emerge as a strong player in the global finance arena, Dar said.

In this regard, he requested the Islamic Development Bank’s Islamic Research and Training Institute for its academic support.

The objective of the third financial innovation challenge fund is to promote Islamic financial services to meet the latent demand for Shariah compliant financial services in Pakistan.

In his welcome address, SBP Governor Ashraf Mahmood Wathra said that the establishment of Centre of Excellence for Islamic Finance would contribute significantly towards developing a more inclusive Islamic financial system leading to financial products with a closer link between finance and real economic activity.

He added the centre would provide Shariah-based solutions for financing needs of all segments including the government and monetary policy instruments for the central bank.

He said that since financial exclusion was quite pronounced in Pakistan. “The government and the SBP are making efforts to address the challenge using innovative approaches and actions,” he added.

According to a SBP document, the Islamic banking industry is beset with a number challenges such as convergence and compliance with global standards, strengthening of liquidity management, development of lender of last resort facilities on a Shariah compliant basis, absence of reliable database on supply and demand of Islamic finance instruments and shortage of qualified Islamic finance professionals that can lead the industry into the next phase.

Published in Dawn, January 10th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Trump 2.0
Updated 07 Nov, 2024

Trump 2.0

It remains to be seen how his promises to bring ‘peace’ to Middle East reconcile with his blatantly pro-Israel bias.
Fait accompli
07 Nov, 2024

Fait accompli

A SLEW of secretively conceived and hastily enacted legislation has achieved its intended result: the powers of the...
IPP contracts
07 Nov, 2024

IPP contracts

THE government expects the ongoing ‘negotiations’ with power producers aimed at revising the terms of sovereign...
Rushed legislation
Updated 06 Nov, 2024

Rushed legislation

For all its stress on "supremacy of parliament", the ruling coalition has wasted no opportunity to reiterate where its allegiances truly lie.
Jail reform policy
06 Nov, 2024

Jail reform policy

THE state is making a fresh attempt to improve conditions in Pakistan’s penitentiaries by developing a national...
BISP overhaul
06 Nov, 2024

BISP overhaul

IT has emerged that the spouses of over 28,500 Sindh government employees have been illicitly benefiting from BISP....