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ALHUDA CENTRE OF ISLAMIC BANKING & ECONOMICS

Event 3rd International Conference & Exhibition

FocusIslamic Banking & Takaful

PRESENTATION BYProf. Dr. Khawaja Amjad SaeedFounder Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan (2003----), Member Governing Council, International Federation of Accountants (IFAC), New York (1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan (1997-2000), President, Association of Management Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1973-1996).Venue & Date Islamabad, November 02, 2009

Topic

Islamic Banking in Pakistan – A Review

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PRESENTATION FRAME

A. Vision and Mission for Central Bank and its Islamic Banking Department

B. Strategy for Islamic Banking in PakistanC. Historical RundownD. Quantitative Analysis E. Future Outlook

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1. State Bank of Pakistan Annual Report 2008-09, Karachi: SBP, P. 42.

2. Frequently Asked Questions (FAQs) on Islamic Banking, Karachi: SBP-Islamic Banking Department, February 23, 2009, PP 1-35.

3. Pakistan’s Islamic Banking Review: 2003-2007, Karachi, SBP: Islamic Banking Department, PP1-77.

4. Strategic Plan for Islamic Banking Industry of Pakistan, SBP: Islamic Banking Department, N.D, PP 1-57.

5. Risk Management Guidelines for Islamic Banking Institutions, Karachi, SBP-Islamic Banking Department, January 02, 2008, PP 1-19.

6. Islamic Banking Bulletin: Karachi: SBPL Islamic Banking Department, June 2008.

7. Islamic Finance: Opportunities and Challenges Karachi, SBP: A Collection of Speeches by Governor SBP from 2006-2008 PP 1-37.

SOURCES:

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A: PAKISTAN: VISION & MISSIONFOR CENTRAL BANK AND ITS ISLAMIC BANKING

DEPARTMENT

SBP-for the Central Bank

VISIONSBP-for the Islamic Banking

Department VISION

To Transform SBP into a modern and dynamic central bank, highly professional and efficient, fully equipped to play a meaningful role, on sustainable basis, in the economic and social development of Pakistan.

To make Islamic banking the banking of first choice for the providers and users of financial services.

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SBP-for the Central Bank

MISSIONSBP-for the Islamic Banking

Department MISSION

To promote monetary and financial stability and foster a sound and dynamic financial system, so as to achieve sustained and equitable economic growth and prosperity in Pakistan.

To promote and develop Islamic Banking industry in line with best international practices, ensuring Shariah compliance & transparency.

A: PAKISTAN: VISION & MISSIONFOR CENTRAL BANK AND ITS ISLAMIC BANKING

DEPARTMENT

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THREE PRONGED * Full fledged Islamic Banks in Pakistan Sector * Conventional Banks to set up

(a) Islamic Banking subsidiaries (b) Stand alone Islamic Banking Branches

B: PAKISTAN SBP STRATEGY FOR ISLAMIC BANKING

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1. PAKISTANCreated out of Islamic Ideology

2. QUAID-E-AZAMInaugural Speech of SBP of July 01, 1948

3. CONSTITUTION OF PAKISTAN Article 38 (f)“The state shall-----eliminate riba as early as possible”.

4. Inretrospect 1970s: - Efforts started to eliminate riba.1980s: - Bold and comprehensive initiative.

- Pakistan among three countries in the world for interest free banking.

C: PAKISTAN ISLAMIC BANKING HISTORICAL RUNDOWN

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4. Inretrospect 1980s: - Review of Laws

- SBP Act - Companies Ordinance 1984- Recovery Laws - Negotiable Instrument Act

- June 26, 1980: PTC-New Interest free instrument of corporate financing- NIB-12 modes - January 01, 1981, separate interest free counters- July 01, 1982-Musharaka for working capital needs of trade & industry- April 01, 1985-profit & loss sharing

basis.

C: PAKISTAN ISLAMIC BANKING: HISTORICAL RUNDOWN

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4. Inretrospect 1990s: - Federal Shariat Court: November 1991

- December 23, 1991“Laws involving interest would

cease to have effect finally by June 30, 2001”2000s - January 2000, Commission for

Transformation of Financial System constituted in SBP

- Task force set up to suggest ways to eliminate interest from govt financial transactions

- Conclusion-Parallel Banking system

C: PAKISTAN ISLAMIC BANKING HISTORICAL RUNDOWN

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1. Islamic Banking-Year wise entry 2. Islamic Banking Industry Progress3. Islamic Banking Industry Progress

- Selected Indicators4. Trends in Islamic Banking

D: QUANTITATIVE ANALYSIS

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D1: PAKISTAN: ISLAMIC BANKING: YEAR WISE ENTRY

Year Number

2003 4

2004 5

2005 2

2006 6

2007 2

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D2: PAKISTAN: ISLAMIC BANKING INDUSTRY PROGRESS

Particulars 2003 2004

2005

2006

2007

1. Full fledged Islamic Banks (IB)

1 2 2 4 6

2. Branches of IBBs 10 23 37 93 186

3. Conventional Banks with IBBs

3 9 9 12 12

4. Branches of Conventional Banks

7 25 33 57 103

5. Total Islamic Banking Institutions (1+3)

4 11 11 16 18

6. Total Number of Branches (2+4)

17 48 70 150 289

D E C E M B E R NUMBER

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D3: PAKISTAN: ISLAMIC BANKING INDUSTRY PROGRESS: SELECTED

INDICATORS

Particulars 2003 2004

2005

2006

2007

1. Total Assets 0.5 1.5 2.0 2.8 4.0

2. Deposits 0.4 1.3 1.8 2.0 3.8

3. Financing & Investment

0.5 1.3 1.7 2.3 3.5

DECEMBER GROWTH PERCENTAGE

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D4: PAKISTAN: TRENDS IN ISLAMIC BANKING

Particulars June2004

June2005

June2006

June

2007

June2008

1. Deposits 13 38 60 107 163

2. Financing & Investments

13 37 58 89 163

3. Total Assets 19 54 88 158 230Source: Edited from: SBP Report 2008-09, P. 43.

BILLION RUPEES

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E: PAKISTAN: ISLAMIC BANKING: FUTURE OUTLOOK

1. Forecast - 2012- Total Assets of Islamic Banking Industry: Rs.

1Trillion- 1200 branches in 5 years - Deposits: Rs. 1 Trillion - 12% share of total banking industry2. Challenge/Opportunities - 15,000 people needed in next 5 years- Shariah compliant financial services- Increased interest from GCC investors - SME, micro finance, agriculture - Demonstrate growth with profitability- Differenciated products

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