The International Monetary Fund (IMF) has released its guidelines for the Islamic finance sector. The guidelines noted the need to develop a policy framework in the countries where Islamic banking has become systemically important. While accounting for a small share of global financial assets, Islamic banking has established a presence in more than 60 countries and has become systemically important in 14 jurisdictions.
Although Pakistan finished the IMF loan programme last year, there are still numerous reforms that need to be undertaken. In recent years, the State Bank of Pakistan (SBP) has made efforts for the promotion of Islamic banking, but no real effort has been made by the private sector and the government. The growth of Islamic banking poses new challenges and risks for regulatory and supervisory authorities. The IMF has proposed support for developing and providing policy advice on Islamic banking-related issues in the context of fund surveillance, programme design, and capacity development activities.
Meezan Bank, Pakistan's first and largest Islamic bank, has recently signed a multi-faceted Memorandum of Understanding (MoU) with the International Shari'ah Research Academy for Islamic Finance (ISRA), aimed at jointly expanding the role of Islamic finance through collaborations on various aspects of this field.
This comprehensive MoU further sets out a clear roadmap for research into the domains of Shariah and Islamic finance that should be facilitated by exchange of best practices in research and training. Meezan Bank would also be providing joint services with respect to arrangement of seminars, conferences, workshops and short-term courses.
While commenting on this agreement, Irfan Siddiqui said: "This MoU recognises the critical need for addressing the Islamic finance challenges through collaborations and partnerships in order to meet the heightened demand for Islamic banking products and services. The Meezan Bank is committed to develop and promote Shariah-compliant finance industry and we are quite hopeful that this agreement would enhance opportunities through increased exposure and knowledge sharing."
Al Meezan Investment Management (Al Meezan) announced the launch of Meezan Strategic Allocation Plan-I (MSAP-I), an allocation plan under the newly launched fund of funds scheme, Meezan Strategic Allocation Fund. According to Al Meezan CEO Mohammad Shoaib, the plan has an initial term of two years and is now open for subscription. He added that the previous plan with two years duration was very well received by the investors as it gained a cumulative return of 26.21% since its inception. He said the new MSAP-I plan was an ideal investment for those who wished an active asset allocation between Shariah-compliant equity and money market schemes. Al Meezan is the largest private sector asset management company in Pakistan with total assets under management of Rs 86.96 billion in 11 funds and has investor base of 47,000 clients.
Senior Vice President of State bank of Pakistan (SBP) was gunned down in the area of Gulistan –e- Johar, within the jurisdiction of Shariah Faisal police. Superintendent Police (SP) Gulshan Doctor Fahad Ahmad said that Muhammad Sadiq Siddiqui was going to a bakery when two alleged dacoits attempted to snatch his vehicle. On resistance, dacoits opened fire on him. As a result, he sustained serious injuries and died, while dacoits managed to escape from the scene with car.
The Sr. Vice President FPCCI has lauded the decision of Finance Minister for formulating a Committee for the implementation of recommendations of the Steering Committee for the promotion of Islamic Banking. The expansion and promotion of Islamic banking is the need of the hour because it is risk-sharing and asset-backed nature and was growing and unaffected in the period of global financial crisis.
Sr. Vice President FPCCI Shaikh Khalid Tawab, elaborated that Islamic Banking has become an emerging field in global financial market and the time has proved that it has tremendous potential and is growing at a very fast pace all around the world. He added that Pakistan, with more than 95 % Muslim population, and a constitutional obligation of ensuring a riba free economic system, has huge potential of expanding Islamic banking. This is, if the deposits are used on the basis of detailed analysis to get rate of return more than the conventional banks because at present the return on the Islamic banks instruments is lesser than the conventional banks.
State Bank of Pakistan Deputy Governor Saeed Ahmed said that there is a dire need to create awareness to promote Islamic banking. According to the Global Islamic Finance Report (GIFR) 2016, Pakistan ranks ninth in terms of development of Islamic financial services industry. However, there is still a capacity of 40 million more people in the banking market that the Islamic finance sector can explore. In June the State Bank of Pakistan (SBP) noted that the Islamic banking industry had witnessed a growth of 7.4% in April to June quarter. Its assets reached Rs 1,745 billion while its deposits also increased by 9.3%. This shows a market capitalisation of 13.2%. There is still room to grow and the Islamic financing institutions can increase their operations and market shares.
Aimed at raising awareness of and promoting Islamic finance in the country, Bank Alfalah has organised the launch of a book titled ‘Shariah Minds in Islamic Finance’ by the scholar Dr Mohammadd Daud Bakar. The book presents insights into the life of an international scholar, discusses stakeholders’ expectations and defines the ultimate role scholars should play in shaping the industry’s future. Dr Bakar currently serves as Chairman of the Shariah Advisory Council at the Central Bank of Malaysia, the Securities Commission of Malaysia, Labuan Financial Services Authority and the International Islamic Liquidity Management Corporation (IILM). He is also a Shariah board member of various financial institutions.
A fraud of around Rs 30 billion in Islamic investment system of Mudarba and Musharaka has been committed by the Elixir Group of Companies, reveals an investigation by National Accountability Bureau. The fraud, which has victimised over 35,000 people across the country, was committed by a group of so-called Islamic scholars through a large number of mosque imams, seminary managers, madrassa students, their families, relatives and acquaintances. The scam planners are all settled abroad and most of them have dual nationalities, according to a NAB officer who is close to the investigation process.
Western companies have been rushing into Iran for a part of post-sanctions business action but European banks, still reeling from punitive US fines over links to the country, are waiting on the sidelines until they feel it is safe to do business with Tehran. France has already hailed a new era after welcoming Iranian President Hassan Rouhani, who sealed a host of post-sanctions deals last week. But when it comes to high finance, there is hesitation, at least on the part of European banks. The hefty fines levied on these financial institutions during the sanctions has made them particularly wary. European banks are not only confronted with potential sanctions risks, but also other exposure points under international banking regulations and practices.
The State Bank of Pakistan (SBP) rejected request of Jehangir Siddiqui and Company Limited (JSCL) to review its decision to disallow Dubai Bank to sell out its shares to its sponsor shareholders of BankIslami. JSCL approached the central bank in September 2015 to submit an application to the central bank with suggestions in order to getting additional shares in BankIslami. However, the central bank retained its decision and disallowed the management of BankIslami to sell its stakes of Dubai Bank to JSCL in pursuant to Founding Shareholding Agreement under which sponsor shareholders are not allowed to increase its shareholding. Earlier in August 2015, a consortium led by Ali Hussain of JSCL and Alkaram Group offered Dubai Bank to purchase its 144.200 million in the BankIslami.
Premier Insurance appointed Imran Taqi Usmani as Shari’ah Adviser and Ernst and Young Ford Rhodes Sidat Hyder as Shari’ah Auditor. Premier Insurance, which deals in various conventional insurance products, is offering Shariah compliant products, Takaful. The Securities and Exchange Commission of Pakistan (SECP) enable Takaful business in the country and Premier Insurance offers the various services to clients across all economic sectors and products in all classes of general insurance. Imran Taqi Usmani, son of Justice (r) Taqi Usmani, renowned Islamic scholar holds LLB, MPhil and PhD degrees in Islamic Finance. He also holds an Alamiyya and a Takhassus (Specialisation in Islamic Jurisprudence) from Jamia Darul-Uloom, Karachi.
Standard Chartered Pakistan has established a Shariah board to help guide the bank's transactions in accordance with the principles of Shariah. This board has been formed in compliance with the Shariah Governance Framework and from the directives of State Bank of Pakistan. The members are: Sheikh Nizam Yaquby (Chairman), Mufti Muhammad Abdul Mubeen, Mufti Irshad Ahmad Aijaz and Mufti Muhammad Abdullah. Through liasing with the board of directors and senior management of the bank, the Shariah board shall ensure Shariah compliance as per regulatory requirements. The board would also endeavour to provide guidelines for devising new products and services.
Speakers at a conference have urged the financial institutions and civil society to play their role by supporting an inclusive financial sector policy framework for equal access to financial services.
The workshop, which was attended by the scholars of Indonesia, Nigeria, Kenya, Kingdom of Saudi Arabia, Uganda, Sudan and US, is focused on bringing forth recommendations that will help in devising sustainable strategy for development of inclusive finance.
The two-day moot is jointly organised by International Institute for Islamic Economics of IIUI in collaboration with Islamic Research and Training Institute, Islamic Development Bank, Jeddah.
Speaking on the occasion as the chief guest, Islamic International University Islamabad President Dr Ahmed Yousif Al-Draiweesh stressed on the Muslim economic researchers to work for devising strategies for an interest-free transparent economic system. He was of the view that financial issues be observed in the light of Islamic teachings. The IIUI president hoped that conference would bring beneficial and significant recommendations pertaining to the financial and economic issues.
In order to remove any ambiguity and doubt among the general public, the State Bank of Pakistan (SBP) has reiterated its commitment for promotion and development of Islamic banking in Pakistan.
Due to persistent efforts of SBP and the federal government, the share of Islamic banking in total deposits of the banking industry has surged to 12.8% as of June 30, 2015 and is consistently growing with a cumulative average growth rate of over 50% during the past 12 years. To-date, 5 full fledge Islamic banks, one Islamic banking subsidiary and 17 banks with dedicated Islamic banking branches are operating in the country with over 1,700 branches spread all over the country.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Muhammad Adrees appreciated the joint collaboration between Pak-Qatar General Takaful Limited (PQGTL) and non-bank financial institutions (NBFI) & Modaraba Association of Pakistan (MAP) while speaking at the memorandum of understanding (MoU) signing ceremony. He said that it is a milestone of collaboration for promotion of the Islamic financial system. The ceremony was jointly arranged by NBFI&MAP and PQGTL for providing takaful coverage to the members of the association on the basis of Islamic modes.
The management of BankIslami has appointed Shahid Ali Khan as the new CEO of KASB Securities, the subsidiary of KASB Bank. Khan replaces outgoing CEO, Irfan Nadeem Sayeed. The management, which had earlier pledged not to force officials of KASB Bank to quit, is now placing its officials on key positions in sheer contradiction of the claim it made at the time of merger of KASB Bank with BankIslami. In the emergent meeting of the board of directors recently, BankIslami management appointed new leadership for KASB Bank’s subsidiary, including new CEO and a board of director, M Nasurur Rahman, in the place of Tahir Iqbal.
The Lahore High Court (LHC) on Thursday issued notices to the Ministry of Finance, State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP) and others on the petition of a shareholder against amalgamation of KASB Bank with BankIslami. The petitioner, First Capital Equities Limited, who owned approximately 94,000,000 shares worth approximately Rs 210 million in the KASB Bank, moved the court against SBP’s moratorium and amalgamation of the bank with BankIslami. The petitioner maintained that its fully paid-up shares in the bank were unlawfully cancelled and extinguished due to the merger without its consent and opportunity of hearing.
The Security and Exchange Commission of Pakistan (SECP) has asked the State Bank of Pakistan (SBP) to review the deal to merge KASB Bank and BankIslami, which cost millions of rupees to the equity investors. Sources said that SECP Chairman Zafar Hijazi wrote a letter to SBP Governor Ashraf Mehmood Wathra, urging him give compensation to equity traders who faced losses as a result of the amalgamation of BankIslami with KASB Bank. The value of KASB Bank’s shares became zero after the amalgamation process – as the shares now stand cancelled and retired – and there was no protection to investors’ money, mainly that of shareholders.
Indonesia’s Islamic insurance market will be reshaped over the next decade by a new law that requires conventional firms to spin off their sharia-compliant units, while encouraging more foreign investors to enter the market. The takaful market in Indonesia is dominated by so-called “windows”. The new law, which came in force last month, requires insurers to spin off their windows within 10 years. Most firms are likely to meet the spin-off requirement as late as possible and they will first expand their sharia units to ensure they are big enough to be spun off easily. The rules are expected to spur consolidation among conventional firms.
Costs of issuing Islamic bonds in Asia are still significantly higher than the costs of issuing conventional bonds, a study by the Asian Development Bank found. In Indonesia, profit rates for sukuk issued by the government are on average 86 basis points higher than comparable conventional government bonds. In Malaysia profit rates for sukuk are on average 8 bps higher. However, lack of familiarity with complex sukuk structures can translate into higher advisory fees for prospective issuers, while investors demand higher yields because of limited trading activity in secondary markets for sukuk. The average gap between issuance costs for sukuk and conventional bonds in the Gulf is believed to be very small or non-existent - and in some cases, it has even proved cheaper to issue sukuk.