Islamic banking, modes moving up in Pakistan
The conventional sector still has the remaining 85 per cent.
Islamabad - Sector secures 15% of overall market share in 2016
Islamic banking modes and products are steadily moving up in terms of financial transactions, the sector's reports and industry leaders confirm.
Islamic modes, financing and products have captured at least 15 per cent of the overall financial market share in 2016 as new products are being introduced and more customers are attracted. But the conventional sector still has the remaining 85 per cent.
The fact that Islamic banking and financial modes are spreading in the country and its business with several other countries abroad - including the UAE, Saudi Arabia, Malaysia and other countries.
The interest in doing business with an Islamic and even conventional modes with Islamic countries is illustrated by the results and profits attained by the UAE-based banks Alfalah and Bank Al Meezan.
Bank Alfalah, for instance reported "a double-digit top line growth." Its CEO Atif Bajwa said: "Bank Alafalah has, and unlike its peers, where the profitability was driven largely from non-funded income, our growth stemmed from the top line balance sheet."
"The bank has not shied away from advances - which is the reason for top line growth," he said. Its ADR stood a 52 per cent as at September CY-2015. Its profit after tax was Rs7.523 billion in CY-15, up 33 per cent from Rs5.641 billion in CY-14.
Irfan Siddiqi, CEO, Meezan Bank, is quite upbeat over the success of Meezan Asset Allocation Plan-1. He said: "This is the only full-fledged Shariah-compliant Asset Management company in Pakistan, which is operating under the guidance of Shraiah Board of Meezan Bank, headed by Justice (retired) Mufti Muhammad Taqi Usmani. It is managed by seasoned professional fund managers of Al Meezan Investments. It has 20 years of track record of managing customers' investment in the stock market. Up to 100 per cent equity participation, based on Fund Managers outlook on the market is allowed. The minimum investment is Rs5,000. The customers will avail Tax Rebate on their investment according to Section 62 of Income Tax Ordnance."
He also said: "Iit is the first of series of Asset Management Plans, managed by Al Meezan Pakistan's asset management company in he private sector, based on assets under the management of Rs66.4 billion which will help investors in making worry-free investment in the Stock Market."
This bank is funded with shareholding by Noor Financial Investment Company, based in Kuwait, which has 49 per cent shareholding. Pakistan-Kuwait Investment company has 30 per cent shares in it. Its chairman of board is Shaikh Ebrahim bin Khalifa Al Khalifa. The bank, through its subsidy, has introduced "Meezan Asset Allocation Plan-1. It is Pakistan's largest asset management company, and the plan is the first in the series of asset management.
Meezan Bank itself is doing fine in is financial operations. It reported a Rs2.67 billion profit for the first half of CY-2015. "It showed, it is maintaining its growth momentum as well as profitability record," financial market analysts said. Meezan Bank is Pakistan's eighth largest bank with 450 branches in the country. The bank has been recognised as "the best Islamic bank in Pakistan", by many Pakistani and international organisations.
The JCR-VIS Ltd, an affiliate of the Japan Credit Rating Agency has reaffirmed the banks' long-term entity rating at AA, and short term rating at A1+ with stable outlook. Its A1+ rating is the highest in short-term ratings.
Among others initiatives in the Islamic banking and financing fields like is the highly efficient, UK-based Standard Chartered Bank, the oldest foreign bank with the largest number of its branches is bringing for its customers innovative and Shariah-compliant financial solutions "so you can bank with peace of mind". Its Saadiq offers the Saadiq Worldwide Credit Card, which it insists is "the only Shariah-compliant credit card in Pakistan that helps you earn World Miles on your card spent only to flying the world over". The card lets you: fly airline of your choice, travel in style with access to over 80 airport lounges worldwide, avail Concierge Services for booking tickets, hotels and more, enjoy shopping discounts in Pakistan and the UAE.
As Islamic banking and financial modes move ahead, the financial market regulator - Security & Exchange Commission of Pakistan (SECP) has advised insurers running Window Tafakul operations to prepare a separate set of financial statements for general Takaful operations as a standalone Takaful operator. Window Takaful operators were allowed to report assets and liabilities, revenues and expenses for each segment of conventional and Takaful business in consolidated books.
The new standalone financial statements will also be subject to audit and review. Takauful business is expanding at quite a fast speed. Takaful is the Islamic alternative to conventional insurance products. SECP projects that "at least half of Pakistan's conventional insurers will eventually offer Takaful products in the near future," SEP spokesman said.
The insurance penetration, measured as total premiums to gross domestic product, has hovered at 0.7 per cent of GDP for the last decade. Now it stands at around one per cent of the GDP. The growth is encouraging for Islamic financial products market.
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Takaful has contributed marginally as the sector represents nearly five per cent of the total insurance market. But this is projected to go into double digit in the near future. This shows, the energy, Takaful companies, which are only six to seven year old, are putting into their business. It also illustrates the greater appeal Islamic products are attracting from the customers.
An historic review of the Islamic sector, by State Bank of Pakistan (SBP), the central bank, and the financial market analysts, shows that the Islamic banks alone witnessed a growth of 23.3 per cent in CY-14, totalling Rs1.070 trillion. It was Rs868 billion in CY-13. Pakitn had 22 Islamic Banking institutions, including five banks, and 17 conventional banks which operate 1,574 Islamic Banking Branches. The system has 929 Islamic Windows which are run by conventional banks. At the end of cy-14, the market share of Islamic banking assets was 10.4 per cent and deposits were 11.6 per cent.
As all this goes on, it strengthens the view that larger the number of products, greater the appeal to the customers.