Islamic banking & Finance Archives - The Financial Daily

Islamic Finance and Poverty Alleviation in Pakistan: A Compassionate, Comprehensive Strategy

Webmaster — Thu, 16 Oct 2025 23:47:48 +0000

Poverty in Pakistan has reached distressing proportions. In 2025, under the World Bank’s new international poverty threshold of US$4.20 per person per day, approximately 44.7% of the population falls below the poverty line. At the same time, extreme poverty—living on less than US$3 per day—afflicts about 16.5% of people, nearly 40 million individuals.

Meanwhile, per-capita income has been under severe strain. During fiscal year 2022-23, Pakistan’s per capita income dropped by about 11.38%, reaching approximately US$1,568. This decline is a stark reminder that many households are not just poor by international standards, but that their income is losing purchasing power and stability.

Geographically, the hardship is uneven. The poorest districts—such as Washuk in Balochistan, with a poverty headcount rate of 72.5%—stand in stark contrast to districts like Abbottabad, whose poverty rate is just 5.8%. Rural areas in Punjab, Sindh, Balochistan, and Khyber Pakhtunkhwa suffer from weak infrastructure, limited access to clean water, education, electricity and healthcare—factors which both cause poverty and magnify its effects.

Why Islamic Finance Matters

Islamic finance, guided by principles of fairness, risk-sharing, avoidance of exploitation (riba), and social welfare, offers tools especially suited to address poverty in a way that is both effective and morally grounded. Key amongst these are:

Interest-free or low-profit microfinance (Qard, Qard Hasan, Murabaha under cost-plus, etc.), which can provide capital to the poor without the burden of usurious interest.

Profit and loss sharing (Musharaka, Mudaraba) models that align incentives between investors and entrepreneurs, reducing the risk of indebtedness.

Takaful (Islamic insurance), to mitigate the hardships caused by health shocks, disasters, or other losses, without involvement in non-Islamic insurance models that may include forbidden (haram) elements.

Zakat, Sadaqah, and Awqaf (endowments)—already significant in Pakistan’s social safety-net tradition—that can be mobilised more systematically, with better governance and targeting, to reach the poorest of the poor.

Existing Efforts in Pakistan

Pakistan already has several promising programmes and institutions:

Pakistan Poverty Alleviation Fund (PPAF): has long worked to provide microfinance, community-led development, and institutional support to vulnerable populations.

Akhuwat Islamic Microfinance: offers interest-free (Qard Hasan) loans to people usually excluded by mainstream lenders, helping them start small businesses, purchase tools or livestock, etc.

Ehsaas Programme: a large-scale government initiative that combines cash transfers, health-and-education support, and other welfare services.

Zakat and Awqaf Departments: traditional Islamic institutions involved in welfare, but often challenged by inefficiencies, uneven reach, and governance issues.

These efforts have had real positive impacts: improving household resilience, enabling small entrepreneurs, increasing school enrolments, and reducing vulnerability in crisis times. But they are insufficient in scale and coherence given current needs.

What Needs to Be Done: A Comprehensive Strategy

To significantly reduce poverty in Pakistan—both in depth (extreme poverty) and breadth (vulnerability)—a multi-pronged, human-centred strategy rooted in Islamic finance can be effective. Key pillars:

Scale up Islamic microfinance

Increase availability of interest-free or low profit-margin micro-loans, especially in rural and underserved districts.

Simplify collateral requirements; reduce bureaucracy; partner with local community organisations.

Embed financial education so recipients understand both risks and opportunities.

Support entrepreneurship and skills

Provide training, mentorship, and access to markets for artisans, small-scale farmers, and women entrepreneurs.

Use Musharaka/Mudaraba contracts where investors share risk and reward with local entrepreneurs.

Innovate financial inclusion

Introduce mobile Islamic banking services, micro-Takaful products, savings instruments compliant with Sharia, etc.

Leverage digital platforms to reach remote regions, reducing transaction costs.

Strengthen Zakat, Sadaqah, and Awqaf governance

Ensure transparent, accountable management of funds.

Mapping of need: using data (poverty surveys) to target the most deprived districts and communities.

Engage local communities to participate in decision-making — to ensure funds are used in culturally appropriate and practically helpful ways.

Policy & Government role

Develop a coherent Islamic finance policy framework, supporting microfinance, Takaful, and alternative financing models.

Budgetary allocations: ensuring sufficient, predictable funding for poverty alleviation programmes.

Inter-agency coordination: between finance, economic planning, social welfare, religious affairs ministries, local governments.

Monitoring & evaluation: regular surveys (Household Income and Expenditure Surveys, etc.), impact assessments to adjust programmes as necessary.

Resilience to shocks

Strengthen safety nets for floods, inflation, health crises. COVID-19, climate shocks, macroeconomic volatility all threaten to push vulnerable people back into poverty.

Ensure that Islamic finance tools include protection (Takaful, emergency funds, community savings clubs) that can be mobilised swiftly.

Challenges & Cautions

Implementing such a strategy has challenges:

Data gaps and lags: many estimates are based on outdated survey data (e.g. HIES 2018-19).

Inflation and currency depreciation eroding purchasing power even where incomes analytically increase.

Awareness and trust: many poor households may not be familiar with Islamic finance instruments, or may mistrust financial institutions.

Regulatory oversight and governance: ensuring transparency and avoiding leakage of funds or misuse.

Scalability: bringing small programmes to scale without loss of quality or mission drift.

Looking Ahead

If Pakistan pursues a deliberate strategy combining Islamic finance tools, social welfare, and strong governance, there is cause for cautious optimism. Reversing the slide in per capita income (which stood at about US$1,568 in 2022-23) and shrinking both general and extreme poverty will require sustained effort—but it is possible.

Efforts in other Muslim-majority countries have shown that where microfinance, Zakat, and ethical financial products are properly structured, poverty can be reduced not only in terms of income but in enhancing dignity, health, education and long-term opportunity.

Conclusion

Eradicating poverty in Pakistan is more than economic arithmetic—it is a moral imperative. Islamic finance gives both the ethical framework and practical instruments to do more than mitigate suffering: to empower people, strengthen communities, and build equitable opportunity. As Pakistan contends with inflation, inequality, economic headwinds and climate pressures, a comprehensive, human-centred strategy rooted in Islamic principles could make poverty alleviation not merely a policy goal, but a shared transformation.

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Urgent need for primary legislation, solid Shariah governance so as to boost Islamic finance area: IPS

Webmaster — Tue, 29 Apr 2025 00:53:49 +0000

ISLAMABAD: Urgent dedicated primary legislation, swift adoption of AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) standards tailored to local financial context, and the establishment of a stronger Shariah governance framework are critical steps needed to ensure the sustainable and credible growth of Islamic banks and non-bank financial institutions in Pakistan. This requires coordinated efforts across the regulatory, legal, and institutional fronts, as no financial framework operates in isolation, says a Press release.
Leading financial and legal experts highlighted this at a session ‘Towards a Shariah-Based Islamic Finance Ecosystem in Pakistan’ held to discuss the legal framework for Islamic banks and non-bank financial institutions at the Institute of Policy Studies (IPS), Islamabad.
The discussion witnessed broad participation from the Securities and Exchange Commission of Pakistan (SECP), Islamic banks, academia, and legal professionals. The main speakers included Justice Dr Syed Muhammad Anwer, aalim judge of the Federal Shariat Court, Tariq Naseem, head of Islamic Finance Department at SECP, Tauseef ur Rahman, managing executive, SECP, and Dr Muhammad Ayub, former director, Research and Training, Riphah Center of Islamic Business. It was moderated by Dr Atiquzzafar Khan, board member, IPS.
In a key presentation, Tariq Naseem elaborated on a proposed legal framework for non-bank financial institutions, noting that the

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Islamic Banking and Fintech: The Path to Boosting UAE Remittances, Experts’ Advice

Webmaster — Sun, 15 Oct 2023 21:24:39 +0000

Farzana Mansoor

DUBAI (UAE): The conference, titled “Remitlink23: Resilient Remittances,” was orchestrated by Dellsons Associate in collaboration with the Embassy of Pakistan in UAE and the Foreign Exchange and Remittance Group (FERG). Generous sponsorship was provided by Dubai Islamic Bank, JazzCash, and Instant Cash.
During the conference, speakers highlighted the potential for Pakistani expatriates in Dubai and other Gulf states to increase their remittances to their homeland by utilizing banking channels and taking advantage of financial institutions, government initiatives, and community development efforts.
Addressing the Resilient Remittances (RemiLink23) conference in Dubai as the chief guest, Faisal Niaz Tirmzi, Ambassador to Pakistan for UAE, said the UAE is the second largest host country in the world with over 1.6 million Pakistani nationals, and the number of Pakistani professionals coming to different states of this country is on the rise in recent months.
Pakistani professionals and workers in different states of the United Arab Emirates are resourceful, hardworking, and patriotic, having a deep sense of responsibility to serve their homeland through their valuable contribution, including sending remittances through banking channels, he said and added that the government recently took various initiatives to enhance flow of remittances which are expected to increase the use of banking channels among overseas Pakistanis.
Imad ul Malik, joint treasurer at the Foreign Exchange and Remittances Group (Ferg), said people involved in the hundi system not only deliver money to the doorstep of the recipients, but also offer advance money services to people who need it – which is big incentive for expats. “We should also have microfinance on remittances whereby funds are delivered in advance and people pay a month later,” he said.
Salman Hasan Khan, head of priority banking and PRI at Dubai Islamic Bank Pakistan, said financial institutions played a crucial role in connecting overseas Pakistanis with their relatives in their homeland, but they were working continuously to facilitate the Pakistani diaspora in different states of the UAE. Khan said Pakistanis in different countries preferred Islamic banking over the interest-based system, hence there was a need to promote Sharia-based financial options with innovative technological solutions.
Ibrahim Amin, Chairman Dellsons Associates, said this conference aims to bridge the gap between stakeholders, including Government functionaries, regulators, and service providers such as banks, exchange companies, and fintechs. He said the remittances from the GCC region have a vital role in shoring up the macroeconomic indicators of the country, including the current account and the stability of the Rupee against foreign currency, hence, overseas Pakistanis and their contributions should be appreciated through facilitation and incentives.
The conference on remittance “Remitlink23: Resilient Remittances aimed at bridging the gap between Pakistani community in the UAE and different stakeholders including financial institutions and the government. In these sessions it has been explored that technological and affordable solutions along with incentives should be offered to expatriate Pakistanis in order to revive the flows of international remittances to Pakistan through banking channels while countering the illegal way of Hawala/Hundi, Tufail Ahmed Khan, CEO Dellsons Associates-UAE told The Financial Daily International on the sidelines of the conference at the Pakistan Association Dubai.
The conference also hosted a panel discussion that explained to the audience the importance of using banking channels for sending remittances to their country and its positive outcomes on their relatives regarding stability in local currency and containing inflation.
Experts from the banking and financial sectors of Pakistan and the UAE also spoke at the conference including Tufail Ahmed Khan, CEO Dellsons Associates, UAE, Osama Al Rahma, Advisor to the board, FERG UAE, Usman bin Raees COO, Instant Cash; Suleman Hasan, Chief Compliance and Risk Officer, 1LINK, Zameer Punjabi, Vice Presidents- Payments and Remittances Mashreq Bank, Omer Farooq, Head of Operations, Cash Express, Shabnam Faqeer, Independent Director, DIB Pakistan and Nominee Director, IFC, World Bank Group and others.

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The Islamic Financial Market: A New Major Player in Global Economy

Webmaster — Mon, 22 May 2023 16:39:05 +0000

Simran Kataria

The 2008’s global financial crisis highlighted the risks and vulnerabilities of the traditional financial system. With its emphasis on transparent operations, risk-sharing, and asset-based transactions, Islamic finance provides an alternative model that fosters financial stability and transparency.

This approach has attracted investors looking for more stable and transparent investment opportunities: Islamic finance has recently witnessed rapid growth and gained significance in Asia and the Middle East. Islamic financial systems, including Islamic banks, insurance firms (takaful), and other organizations, have been developed in Muslim-majority nations such as Malaysia, Saudi Arabia, Qatar, and the United Arab Emirates. Another specific aspect that has driven attention is the issuance of Sukuk, the Islamic equivalent of bonds.

While it still represents a smaller share of the global financial market compared to conventional finance, its growth trajectory and expanding international reach are notable. The global Islamic finance market is experiencing significant growth and is expected to reach $6 trillion by 2024.

What is Islamic Finance?

The provision of financial services in accordance with Shariah Islamic law, principles, and standards is referred to as Islamic finance. Shariah prohibits receipt and payment of riba (interest), ‘gharar’ (extreme uncertainty), ‘maysir’ (gambling), short sales, and financing of activities deemed damaging to society.

Instead, the principle of partners sharing the risks and profits of a business transaction applies, and the transaction must have a genuine economic purpose without excessive speculation and must not contain any exploitation of either side.

By fostering economic progress, social welfare, and poverty alleviation, Islamic finance financing supports socially responsible behavior. Investments in industries like gambling, alcohol, cigarettes, and traditional finance with interest (riba) are avoided. It also emphasizes risk and reward sharing, opposes excessive speculation, and promotes investments in tangible assets and constructive economic activity.

Maintaining Financial Stability

Regulatory and supervisory structures have been devised to maintain stability in the sector. Regulators monitor Shariah compliance and enforce prudential requirements suited to the unique risks of Islamic financial firms. At the same time, adequate supervision aids in the identification of possible hazards, the maintenance of market discipline, and the stability of the Islamic financial industry.

Islamic finance is based on the risk-sharing principle, which states that both the lender (Islamic financial institution) and the borrower share the risks and rewards of a business transaction. Thus, the risk-sharing structure of Islamic finance lowers the chance of financial imbalances and excessive risk-taking – creating a more stable financial system.

Exploring available Shariah-compliant products

Islamic finance has expanded to include a wide range of industries and financial products. Banking, leasing, Sukuk (Islamic securities) and equities markets, investment funds, insurance (takaful), and microfinance are the primary components of Islamic finance. Banking and Sukuk assets account for a sizable share (95%) of total Islamic financing assets.

Shariah-compliant investment options available in Islamic finance feature equities, sukuk (Islamic bonds), and Islamic investment vehicles. Given the diversity opportunities and aid in risk management these products offer, investors are becoming more aware of the benefits of including Shariah-compliant investments in their overall investing strategies.

Apart from that, the Islamic financial ecosystem has seen the introduction of Shariah-compliant assets. Islamic Coin, which has raised a record 200 million during the private sale, and is gaining popularity in the Islamic financial market, is a good example. Launched in May 2023, the cryptocurrency operates on the HAQQ blockchain and seeks to empower Muslims worldwide with interest-free financial products to avoid riba.

Is it ethical to invest in Shariah-compliant financial products?

The global demand for socially responsible investing (SRI) or sustainable investing has increased: investors are becoming increasingly concerned about the impact of their investments on society and the environment.

SRI seeks to invest in firms and industries that follow ethical norms while avoiding initiatives with harmful social or environmental implications. For instance, investments in renewable energy, clean technologies, and environmentally friendly projects are encouraged.

As more seek ethical and socially responsible investing options, there is a growing trend for investments in Shariah-compliant financial products. Financial institutions and investment managers have been developing and extending their offerings of Shariah-compliant financial products and services.

This expansion has gone beyond Muslim-majority countries, with Islamic banking gaining a foothold in international financial centers and garnering the attention of investors. Many of the latter, both Muslim and non-Muslim, are drawn to the Islamic finance values of fairness, transparency, and social responsibility, seeking financial opportunities that are consistent with their personal values and beliefs.

Islamic finance market: creating new opportunities

Islamic financial institutions finance a wide range of industries, including infrastructure development, renewable energy, small and medium-sized enterprises (SMEs), and agriculture. These investments serve to create jobs, encourage economic growth, and contribute to overall economic development.

Islamic finance also assists in enhancing inclusion by providing financial services to all sectors of the population and acting as an alternate source of infrastructure funding while diversifying investors’ funding and risk exposures

Promoting Financial Inclusion

Islamic finance promotes financial inclusion by providing individuals and organizations with access to financial services who may have been underserved or excluded from existing financial systems. For example, Islamic microfinance provides Shariah-compliant financial solutions targeted to the needs of low-income individuals and small entrepreneurs, allowing them to access funds, start enterprises, and better their livelihoods.

In countries with large Muslim populations, there is a strong demand for Islamic financial products that align with their religious beliefs and principles. Islamic finance, including microfinance, has been recognized as a key tool in reducing rural poverty and promoting financial inclusion in Muslim countries.

Islamic microfinance institutions have successfully reached out to underserved populations, particularly in rural areas, who may have religious concerns regarding conventional microfinance products. It has bridged the gap for those who may be excluded from accessing traditional microfinance due to religious considerations.

Financing Infrastructure

Islamic finance provides an alternative source of long-term capital for infrastructure projects, contributing to economic growth, job creation, and improving public services. Through Sukuk issuances, governments and corporations raise funds for infrastructure development such as transportation networks, power plants, and social infrastructure.

Islamic Finance, reshaping the financial landscape

Islamic finance has emerged as a significant player in the global economy. While it still represents a smaller share of the global financial market, its rapid growth and expanding international reach are notable. As the benefits of Islamic finance are becoming widely recognized, Shariah-compliant financial products and services spread well beyond Muslim-majority countries.

By embracing the principles of fairness, transparency, and social responsibility, Islamic finance is reshaping the global financial landscape and opening doors to a more inclusive and sustainable economy.

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ICIBF 2022 envisions the Islamic Banking’s future

Webmaster — Wed, 02 Nov 2022 21:54:11 +0000

ICIBF 2022 envisions the Islamic Banking’s future

KARACHI: Syed Samar Hasnain, ED, Development Finance Group, SBP was the Guest of Honor at the 6th International Conference on Islamic Banking and Finance (ICIBF 2022). It was organized by the Accounting and Finance Department at the Institute of Business Management (IoBM) on November 2, 2022, says a Press release.

The two-day conference was held under the patronage of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Bahrain.

In his Welcome Address, President IOBM, Talib Karim suggested that educational institutions should collaborate with the corporate sector and other academic institutions. Dr. Muhammad Imran, Group Head of Islamic Banking, Bank Alfalah, shared that Islamic finance works on the principles of cooperation and generosity in contrast with conventional banking’s concepts of concentration of wealth and its inequitable distribution.

Zahid Ahmed, CEO, Al Baraka Bank Pakistan called for the stakeholders to pursue Islamic banking’s sound ideologies.
“The association between industry and academia will be the game changer for Pakistan”, remarked Syed Amir Ali, President, and CEO, BankIslami Pakistan.

Ahmed Ali Siddiqui, SEVP and Head, Product Development and Shariah Compliance, Meezan Bank commented that financial inclusion through technology must be used to promote Islamic banking.

Syed Samar Hasnain reiterated that financial institutions are important for Pakistan’s economic growth. He shared the five pillars of Islamic banking and provided an introspective analysis of the present state of Islamic banking in Pakistan.

Chancellor IoBM, Bashir Janmohammad acknowledged the efforts by Islamic banks in Pakistan and suggested that Shariah-compliant products should be marketed accordingly to create awareness.

While addressing online, Omar Mustafa Ansari, Secretary-General, AAOIFI, Bahrain, said that the government’s support and rising public demand will increase the share of Islamic banking in Pakistan. He further said that Shariah-compliance products are limited and must be augmented. IoBM also inaugurated the Center for Islamic Business and Finance during ICIBF-2022.

The Global Islamic Finance Report 2022 by the Cambridge Institute of Islamic Finance (Cambridge IIF), UK was also launched. Prof. Dr. Humayon Dar, Director General, Cambridge IIF, UK, presented the report and keynote address.

As many as 40 national and international speakers, Presidents and CEOs of banks, Shariah advisors, and academicians were invited to share key insights regarding the potential, challenges, and developments of Islamic banking in Pakistan.

Dr. Imam Uddin, HOD, Accounting and Finance Department, IOBM, organized the conference with his inspiring team of faculty and students.

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CEIF moot suggests effective roadmap to back Islamic finance

Webmaster — Mon, 30 May 2022 21:05:08 +0000

KARACHI: The Chairman, Securities and Exchange Commission of Pakistan (SECP) Aamir Khan suggests establishment of a high-level Steering Committee tasked with charting an impactful roadmap for the future, encompassing all touchpoints of Islamic finance ecosystem, to promote Islamic finance in the country, says a Press release.
He made this suggestion in his keynote address at World Islamic Finance Forum’s “Development of Islamic Finance Ecosystem for Global Prosperity” conference, organized by Center of Excellence in Islamic Finance (CEIF) on Monday.
It is notable here that a similar committee was formulated in 2013 for promotion of Islamic banking in Pakistan. Aamir Khan also recommended a tax incentive for companies whose financing needs are principally met through capital market Islamic instruments. “This would be a preferred approach than to revive the erstwhile 2% flat incentive,” he said.
He noted that ‘protection, justice, fairness and societal well-being’ are the key goals of Islamic finance, and SECP has been focused on promotion of Islamic financing with all these goals in sight, said Chairman Securities and Exchange Commission of Pakistan (SECP) in his keynote address at World Islamic Finance Forum’s “Development of Islamic Finance Ecosystem for Global Prosperity” conference, organized by Center of Excellence in Islamic Finance (CEIF) on Tuesday.
He shared some of the milestones achieved by SECP in line of Islamic financing, including the listing of PHL energy Sukuk; launch of the first-ever Shariah compliant ETF; approval of the first-ever Shariah compliant developmental REIT; revamping of Commodity Murabaha platform at PMEX; licensing of 2 Shariah-compliant Housing Finance companies; and disbursement of over 43,000 subsidized loans by one Islamic NBMFC.
Emphasizing the role of financial sector regulators in promoting a culture of innovation and entrepreneurship in the Islamic finance space, he shared the example of SECP’s regulatory sandbox that encourages young entrepreneurs and nascent startups, to come up with creative solutions & products. He proposed a similar model exclusively for Islamic finance, through collaboration of all relevant regulators.
SECP Chairman also said that despite these “isolated successes”, structural gaps still exist in the industry, and warrant a concerted national level thrust to understand and address the complete spectrum of financial needs of the population. He stressed on harnessing the role capital markets, NBFCs and insurance sectors towards the development and expansion of Islamic financial ecosystem.
Shedding more light on the structural deficiencies, Khan said that the financial landscape in Pakistan remains bank-centric, while the current policies focused on financial inclusion also remain rather credit-centric. This means that products and solutions like long-term savings, investments, pension, insurance protection, private equity, etc. are not getting adequate attention. Finally, the implementation of inclusion efforts has also mostly stayed limited to the urban centers, except some microfinance lending activity.
SECP Chief also highlighted the need for digitalization in Islamic financial ecosystem to get the system off the ground. “The recent growth spurts in the digital NBFC lending space, must be replicated for broad-based Shariah-compliant financial inclusion,” he said.

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Pakistan Islamic banking assets to grow to 28pc in 5 years: Moody’s

Webmaster — Tue, 24 May 2022 22:10:47 +0000

ISLAMABAD: Moody’s has said that it expects Pakistan’s Islamic banking assets to increase by 25 percent to 28 percent in the next five years.
In a report released on Tuesday, Moody’s said that Pakistan’s Islamic banking industry is growing rapidly with a combination of a predominantly Muslim population, still modest financial inclusion, and the commitment of the government and regulators as the key driving forces.
“We expect growth in Islamic banking to continue to materially outpace conventional banking, reaching a market share of total assets and deposits of around 30% by end 2026, with net financing market share at around 33%. We estimate average growth over 2021-2026 to range between 25%-28% for total assets and deposits, and over 20% for net financings,” said Constantinos Krypreos, Moody’s Senior Vice President.
The report said that Islamic banking assets in Pakistan have grown by an average of 24% per annum over the past decade to PKR5,577 billion (U$31.2 billion), accounting for around 19% of total banking assets, up from 8% in 2011. “We expect annual growth of over 25% over the next five years, pushing up the sector’s market share to around 30%,” it added.
A large Muslim population and still modest financial inclusion are key growth drivers. The country’s large population of over 210 million people is predominantly Muslim. Moreover, financial inclusion in the country is still modest, despite recent progress; according to the State Bank of Pakistan (SBP) approximately 62% of the country’s adult population have an account with a formal financial institution, against an average of 95% in high-income countries. The combination of these factors provides the bedrock for the industry’s development. Past studies have also identified an overwhelming demand for Islamic banking products, with religious considerations an integral part of the decision process.
The government and central bank are taking active measures to support the industry’s growth. The SBP’s five-year Strategic Plan for the Islamic banking industry sets out targets and identifies six areas of focus that will enable the industry to achieve them.
The regulator is also supporting the gradual adoption of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI1) Shariah accounting standards, enhancing liquidity management tools, undertaking numerous awareness, and capacity building programs, and has issued instructions to improve Shariah non-compliance risk management, as per Moody’s report.
The Islamic banking industry in Pakistan comprises 22 Islamic banking institutions, consisting of five fully-fledged Islamic banks and 17 conventional banks that have Islamic banking branches. A total of 3,956 branches were operational in December 2021 with 1,442 additional Islamic banking windows (dedicated counters at conventional branches). In 2021, 500 branches were added, and Moody’s expects a similar number of new branches to be added annually over the next five years.
Increasing the use of digital and electronic channels will also support the industry’s growth. Given its growth potential and strong financial performance, Moody’s also foresees more banks applying for Islamic banking licenses and for conventional banks to convert to fully Islamic banks. Faysal Bank Limited, a mid-sized bank with a market share of around three percent is already in the process of converting from conventional banking to Islamic. – TLTP

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Islamic banking: Many slips between the cup and the lips

Webmaster — Thu, 03 Mar 2022 05:37:38 +0000

The local daily publish an article related to the Islamic Finance in which the writer has explained the role of State Bank of Pakistan. It was written by a seasoned banker who has devoted a major part of his professional life to the cause of promotion of Islamic Banking. Whereas the common opinion on Islamic Banking and the role of State Bank of Pakistan, is ineffectual, as the so-called Islamic Banking and Bankers have proven with the system as “many slips between the cup and the lips”. Sketching out a plan for the rectification of the system entails one to scrutinize the modalities of the prevalent system; one is required to question as to what is visualizing and understanding that Islamic Banking has become “too many actions, but no score” worldwide?
When the Islamic Financial movement started in 1958 from Egypt under the leadership of Dr Ahmed Al Najjar, it developed the Social Banking system in 1962 with the establishment of Mitgmir Saving Bank in the City of Mitgmir, Egypt. The Nasser Social Bank and Faysal Bank was named as MASSRAF as Islam does not have any witness in archives on the institutional way of money handling till Islam as “Deen”, a system for human life was completed. However, Prophet MuhammadSallallahu Alayhi Wassalam wasAmeen, Wise, Trader, and Honest and the concept of “Massraf” essentially revolves around these very qualities of Prophet Muhammad Sallallahu Alayhi Wassalam. Contrarily, at present, the bankers and banking community associated with Islamic Banking adhere to the conventional form and move like a “merry go round” with no directions and understanding to the cornerstone, base and basics of the concept and practice of Custodianship, Trading, Honesty and Wisdom in monetary affairs.
In forty years of my professional life in banking, as a banker as well as a trainer for Islamic Economics and Finance, I have disseminated my knowledge and experience to almost 150,000 students, around 17,000 professionals and 1000 religious’ scholars in Pakistan and the international world. Now reaching the age of 69, my mission is to spread the true spirit of the Islamic knowledge and experience related to Islamic Economics and Finance and to find the way banking should be operated and conducted under the principles of Islamic Economics and Finance from ordinary learners to professionals.
I started my journey in 1982 with the mission to bring the Islamic monetary system into practice by developing remedies for the present banking system with its all blessings as an ‘alternative’ to the ‘conventional system’. These endeavors have been acclaimed by finance and banking professionals across the continents through my writings, lectures and advocacy. My learnings and experiences in this subject range over more than four decades. It expounds that Islamic Monetary System -theory and practice -today needs ‘immediate and ultimate’ reconsiderations by correcting anomalies raised by Muslim and Non-Muslim professionals.
There is still an urgent need to be on familiar terms with the notions of Interest, Profit, and Riba, and to acquire a know-how of the banking practices that do not involve Riba. In this regard, the vital document, ‘Legal Documentation’, is to be prepared in order to provide ‘real soul’ with Shariah importance to replace the conventional deposits, lending and banking, so that it may offer clarity between conventional banking and Islamic interpretations on the factors of production, the man, money and commodity for banking.
It is observed that Central Banks and Commercial Banks operating in Muslim countries that internationally introduced the system are mere observers to the Islamic Banking System and these institutions are full of liquidity without a proper way of investment. It needs to be directed towards better relations between the Islamic and non-Islamic world in banking, financing, investment, and trade.
In addition, present Islamic financial instruments and products do not satisfy the growth of healthy savings, which may ultimately be converted into lucrative investments to bring out the results for socio-economic development and remain only confined to economic development, which is not the goal of Islamic Banking and Finance. The financial products are to be reformulated with incentives to change the economic conditions in (order to ensure) socio-economic development. The Islamic financial products are the urgent need of current Islamic banking practice, which needs to be supported by ‘innovative” products which may give prominence to the system and promote healthy investment opportunities among ordinary individuals, groups, and organizations, while simultaneously help to develop saving conduct that leads to investment in participation.
The international relationship between Muslim and non-Muslim countries through the highly developed ‘Information Base’ with workable financial products to develop investment opportunities within the countries and develop international trade relationships will curb inflation through Islamic financial and banking practice. Furthermore, banking institutions should be brought into a participating relationship with the state revenue requirements and should be made to play an influential role in helping the state develop a documented economy. Moreover, these institutions should be stressed to play their active part in the socio-economic development instead of self-development. Apart from that, protective measures should also be taken against such activities of the non-Islamic institutions and professionals, through which they are misguiding innocent investors by imparting incompatible awareness and training to execute Muslim wealth and by introducing their own Islamic products that are misdirected, defective and have multiple hidden contradictions.
The Islamic Banks can put the wealth in the right direction, and it can only be achieved if Central Banks have a clear concept of their targets towards Islamic Wealth Management. Islamic finance and banking can run parallel and in competition with the conventional system that allows the consumer to make choices. To create an awareness of the reality demands devotion, transparency and spirituality in working for ‘Riba’ free financial system and for eliminating “Interest” as a social evil. This will rebuke the prevailing “Islamic Banking System” which is thrust by vested interests. The world is actively looking forward to the blossoming and expansion of Riba-free banking and not the Islamic banking.
The role of State Bank of Pakistan and its governing team hasbeen seen as pathetic since 1979 and proven as that of a “Ping Pong” referee within the national banking system. In forty years as a monitor, the State Bank of Pakistan has failed to guide the bankers with regards to the reality behind “Rate” and “Ratio” in money matters. It has failed to demarcate and implement the difference between lending and financing. It does not accept the difference between Riba and Interest, and Interest and Profit, Sukuk and Debenture and economic and socioeconomics.
The Governor SBP, without any hesitation, exhibits an endorsement of Riba by announcing the increase and decrease of “interest rate” in the monetary policy. Moreover, the President, Prime Minister of Islamic Republic of Pakistan, as well as their ministers and advisors render no importance and emphasis to the Islamic directives and endorse the concept and the filth of “Riba and Interest”. On the other hand, it is the peak of carelessness on the part of Religious Scholars who remain tight-lipped and reticent over the matter and refrain from vocalizing their concern and guidance over the disobedience of Almighty Allah prevalent within the Islamic state.
Beyond any doubt, the Islamic Economic system offers solution to all the economic crises through its potent economic and financial framework. It guides the banker that learning the Islamic Economic guidance towards the financial system provides an operational system of banking that is based on trade with money for commodity and not money with money. Without such a framework, the banker cannot prove its system to be transparent nor can he accept its depositor as the financial source and as a partner to its banking institution.
One must understand the role of man as force, money as the source and commodity as need in Islamic economics and finance which develop the trading system in which the “volume of money is the value of the commodityand services”. Whereas within the present framework, money is taken in “value against value of commodity and services”.
Islamic financial journey can only be successful and would give the desired outcome if it is fundamentally promoted with training programs honestly instead of spending on conferences and seminars for self-importance and ego satisfaction. Bankers must be honest in dealing and developing the trade and trading techniques, and prove themselves to be Ameen for the trust that the Sarif bestowed upon the bankers.
The writer of concern article, and his intentions towards his professional efforts in the promotion of the Islamic way of Banking cannot be questioned, but I must share my experience as a student, trainer, teacher, banker, columnist and consultant, that an action cannot be deemed correct if the intentions are not fair. One cannot reach to Islamic Banking till the day of judgment, but if one looks into the Merchant Banking, a system which accept Men, money and commodity merely as factor of production, the success seems hardly to be the matter of a fleeting day in comparison to the system proposed and directed by Islam for every Muslim to follow as a Lifestyle and not to trade with Allah for Hell and Heaven.

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Islamic finance must strive so as to become an outward looking industry, says Tarin

Webmaster — Tue, 30 Nov 2021 21:13:15 +0000

ISLAMABAD: Adviser to the Prime Minister on Finance and Revenue Mr. Shaukat Tarin virtually addressed the 10th Islamic Finance Expo and Conference, Tuesday.
Theme of the conference was New Normal-Digital Transformation & Islamic Economy and was organized by The Professional Network and IBA-CEIF.
While addressing the conference, the Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin highlighted the main components of Islamic Banking and stated that Islamic finance is one of the most rapidly growing sectors of the global financial system. It has emerged as an effective tool for financing development worldwide, including in non-Muslim countries.
It promotes risk sharing, connects the financial sector with the real economy, and emphasizes financial inclusion and social welfare. The sustainable development of Islamic finance offers benefits for economic growth, reducing poverty and fostering shared prosperity. He believed that through directed instruments, such as Zakah, Sadaqat, Waqf, and Qard-al-hassan interest free system creates effective wealth redistribution in the society.
The adviser expressed that Islamic finance has much in common with Environmental, Social and Governance (ESG) objectives and has an appeal far beyond Muslim audiences. Structured around risk sharing and avoiding interest, Islamic finance helps reduce poverty, expand access to finance, develop the financial sector, and build stability and resilience.
He emphasized that Islamic finance industry must strive to become an outward looking industry- with a global appeal transcending borders – that presents unique solutions for real world problems. The economic principles taught by the Quran and Sunnah of the Prophet (Peace Be upon Him) provide a useful guide for solving the major economic problems faced by the world today. “No risk, no gain” is the basic juristic principle of Shariah and a normative rule of justice.
The Adviser underlined the core principles of Islam which lay immense weight on inclusion, social justice, and sharing of resources. A Riba free system thus entails the elements of development of real economy, social justice, transparency, equity and property rights; entitlement to profit – with risk and reward sharing; prohibition of speculative behavior and excessive uncertainty.
The Adviser suggested that Islamic banking and finance needs to take the lead for bringing positive change in the financial system through increased focus on value based intermediation and socially responsible investment. Innovations in the use of Islamic financial instruments can go a long way in supporting the SDGs. Green Sukuk is a unique example of an Islamic-based impact investing instrument, which demonstrates how Islamic finance resources can be utilized towards renewable energy investments.
He stressed for strong need of collaboration among academia, Shariah scholars and industry professionals, which can allow synergies along with identifying priority research areas.
In his concluding remarks, the Adviser showed assurance on government’s commitment for development and strengthening the Islamic finance industry in Pakistan. He acknowledged that the involvement of academia and practitioners is vital for continued progress and advancements in the Islamic Financial system.
The Adviser extended felicitation to The Professionals Network and the Centre of Excellence in Islamic Finance, Institute of Business Administration, Karachi on arranging productive conference, and hoped that the event will prove great importance for Islamic finance in this time and age to stay abreast with fast changing digital landscape.
He hoped that the dialogue, deliberations and offerings to be presented here around the new normal, digital transformation and Islamic economy will be useful for our country and for the global Islamic financial industry. – NNI

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Tajikistan’s first Islamic Bank receives Shariah compliance certificate

Webmaster — Tue, 07 Sep 2021 22:56:38 +0000

DUBAI: Tajikistan has fast become the nexus of the development of Islamic Finance in the Commonwealth of Independent States (CIS) recently. The latest addition arrives from the first Islamic Bank established in the country; Tawhid Bank. With the introduction of Tawhid Pay, a mobile application for its customer base, it has effectively launched the Islamic Finance sector of Uzbekistan into a new era of digital banking, says a Press release.
With its successful collaboration with AlHuda CIBE, Tawhid Bank has brought forth its Shariah Compliant digital application in the Islamic Fintech ecology. Pleasantly surprising for the Islamic Finance sector, the masterstroke comes from Tawhid amid a global pandemic.
The TawhidPay App allows transactions to take place in favor of the customer from around the world. Through this app and other partner institution services, the customers of the bank can freely make significant amounts of transactions through card and account and send/receive payments on the go. It ensures a safe, Shariah-Compliant, and hassle-free transaction globally. The attached services that come with the account itself are supportive to the customer’s needs and wants as well, with minimal charges, and encouraging profit.
With the advent of the modern era in the world of finance globally, a healthy increase in the number of cryptocurrencies, digital banking/transaction services, FinTech, etc. catches the eye. With multitudes of opportunities to utilize, many companies and startups worldwide have seized the opportunity to hone in on Islamic Fintech in particular. Over 270 technological platforms working in the Islamic Fintech sector are now operational. This global trend has provided a plethora of investment opportunities to Muslims all over the world that are in line with the Shariah Law and Teachings. In the CIS. TawhidPay has effectively outshone the competition through this latest development in Islamic Banking.
Taking this rise of Islamic Fintech into account, AlHuda CIBE has been providing staunch support to the Islamic Finance sector in Central Asia. The globally recognized research and development organization has been providing Shariah certifications to Fintech institutions which include cryptocurrencies, Islamic Fintech, Digital Banks, etc. Moreover, effective consultancy and advisory services to the financial institutions in the region have also been extended for product and structural development for Islamic Banking, Sukuk, Takaful, Islamic Microfinance, Islamic Fintech, etc. “Central Asia is growing steadily for Islamic Finance,” said Zubair Mughal – CEO AlHuda CIBE. “Applications like these (TawhidPay) will prove vital in financial inclusion and development of Islamic Banking in the region.”.
Expressing his views on this development, CEO Tawhid Bank Zardov Sherali Davlatalievich expressed his pleasure on obtaining Shariah Certification for the Fintech Application from AlHuda CIBE after three months of detailed Shariah Examination. He also enunciated his belief that this Shariah Certification will offer a unique market positioning and that the population will utilize this technological platform by placing their trust in Islamic Banking.
The Shariah Certificate handover ceremony took place at Dubai -UAE, Monday.

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