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Meezan Bank Limited was granted permission by the State Bank of Pakistan (SBP) to conduct due diligence of HSBC Pakistan’s operations. The management of Meezan Bank is reportedly in discussion with HSBC Bank Middle East Limited (HBME) for evaluating a possible transaction involving acquisition of the Pakistan operations of HBME. HSBC Pakistan was put on the block early 2012 and attracted interest from major banks. On June 30, 2012, the business to be sold had 10 branches and gross assets worth Rs60.06 billion (approximately $635 million). Interestingly, in November 2013, Vision Financial Holdings Limited had also shown interest in acquiring 49.11 percent or 492 million shares of Meezan Bank Limited. However, the two transactions are said to be completely unrelated.

Islamic banking industry in Pakistan has been growing at a fast pace ever since its re-launch in 2002 and now represents over 12 percent of overall banking industry with 19 Islamic banking institutions offering Islamic banking products and services through a network of over 1300 branches across the country. The State Bank pf Pakistan (SBP) has announced a five-year strategic plan for the Islamic Banking Industry (IBI) aimed to provide a roadmap to the industry for the next level of development. Moreover, SBP has decided to strictly monitor the performance of the Islamic Banking industry in order to ensure that they are operating according to Sharia. Besides, SBP is working on its major role to ensure the participation of every citizen in the financial system, through its Financial Inclusion Policy.

State Bank of Pakistan and other banks engaged in Islamic Banking have sought media support in mobilizing and inclusion of more people from all sections of the society in the source banking system, especially the agriculture, micro-finance and housing sectors.. In order to create awareness and better understanding among the media people, a two-day workshop on 'Islamic Banking' has been organised for them. The Director of SBP's Islamic Banking Department, Saleemullah, said the print and electronic media is the best tool for opinion making and mobilizing the people towards Islamic banking, Besides establishing riba-free economy, however, the corruption in the society must end. Otherwise, the poverty can not be eliminated.

The Director of the Islamic Banking Department of the State Bank of Pakistan (SBP), Saleem Ullah, has said that the mechanism for short-term liquidity instruments for Islamic banks is being evolved and the launch of these bonds is expected in the next six months. Currently, Islamic banks can only invest in three-year government ijara sukuk. Earlier, experts on Islamic banking and finance agreed the Islamic banks can invest in government activities and projects much like conventional banks but there is a need to create an underlying asset. Another expert said that while the industry has been partially successful in eliminating riba from banking transactions, it needs to introduce diversified products for those segments of the society, which want Islamic investment and financing.

The Securities and Exchange Commission of Pakistan (SECP) has notified the Securities and Exchange Commission (micro-insurance) Rules, 2014, which will also regulate the micro-takaful business in the country. According to the rules, the word micro-insurance may be used interchangeably with the word micro-takaful; life micro-insurance with family micro-takaful; non-life micro-insurance with general micro-takaful; premium with contribution and insurer with operator. The commission has limited the sums insured under different concepts of micro-insurance. The SECP has also issued Code of Consumer Protection applicable on all insurers / operators in the business of micro-insurance / takaful. Moreover, the commission issued the Code of Conduct for Micro-insurance Agents applicable on all micro-insurance / takaful agents and their specified persons.

Pakistani Meezan Bank has launched Meezan Kafalah, a Shariah-compliant alternative to Bancassurance, in collaboration with takaful firm Pak Qatar Family Takaful Limited (PQFTL). Meezan Kafalah is a savings product through which customers can save money for their future plans. In addition, the customers also get Free Takaful coverage through PQFTL that in the case of the customer’s death during the savings period, the Takaful Partner will provide the funds needed for completing the savings. This new product, thus, offers a combination of saving, investment and protection. A differentiating feature of Meezan Kafalah is the accumulation of 100% cash value from day one of the investment with flexibility and ease of exit from the plan without any penalty or charges.

The central bank of Pakistan is stepping up its push to develop Islamic banking, encouraging lenders to expand their operations in the world's second most populous Muslim nation. As of September, Islamic banks held 926 billion rupees ($8.8 billion) of assets or 9.5 percent of the total, up from 8.1 percent a year earlier. The central bank aims to double the industry's branch network and reach a 15 percent share of the banking system in the next five years. To achieve that, the central bank named a new deputy governor to focus on Islamic banking and enlisted renowned scholar Muhammad Taqi Usmani to its sharia board. Moreover, the central bank's media campaign is expected to intensify in coming months and such educational efforts could attract previously unbanked clients to the sector.

Federal Finance Minister of Pakistan Ishaq Dar Wednesday urged to further push the process of Islamisation of banking and finance in the country at the roundtable conference on ‘Potential of Islamic banking in Pakistan’. He said that a committee had already been constituted on the subject with a fairly broad mandate assigned for the realisation of its cherished goal. The committee which would suggest a road map and timeframe for progression of various phases of Islamic banking in the country by December 31, 2014, has initially set the following key areas of investigations: removal of all difficulties being faced by the existing Islamic financial institutions in the operations vis-à-vis conventional institutions and design of new products that may enable government to conduct its resource mobilisation operations through Shariah compliant methods.

In Pakistan, Mudaraba companies and Mudarabas (Non-Banking Islamic financial institutions (NBIFIs)) attracted the major business groups of the country since the early 80s. The Mudaraba sector recorded rapid growth until 1996, when the fall back of NBIFIs began and the country witnessed a large number of closures and mergers during the next fifteen years. This left many of doubts and questions as to the future, viability and adoptability of Islamic finance. The causes of failure can be categorized into seven M's: management, money, major defaults manipulation, mismatch, moral hazards and monitoring. However, most of the national NBIFIs managed to survive and generate lucrative profits for their investors, which shows that it was not failure of the Islamic financial system rather a failure of the management.

Pak-Qatar Family Takaful Limited is a progressive and a technology-driven Shari'ah Compliant company providing Takaful solutions in Pakistan. Beginning operations in 2007, the company has an independent Shari'ah Advisory Board chaired by Mufti Muhammad Taqi Usmani which certifies all products and operations for Shari'ah compliance. The company is rated A (having Stable Outlook) by JCR-VIS Credit Rating Co Ltd. The paid-up capital of Pak-Qatar Family is in excess of Rs 700 million. Pak-Qatar General Takaful Limited is chaired by Sheikh Ali bin Abdullah al-Thani and sponsored by several financial institutions form the State of Qatar. The company is present in all major cities of Pakistan, and is on track to further expanding its branch network.

The Pakistani Islamic Banking Industry (IBI) is in a nascent stage compared to the rest of the world, but has shown constant growth in the past years. Islamic Banks (IB) hold a lion-share of 64 percent in the IBIs total assets. In terms of share, IBs contribute only 30 percent to the IBIs total advances, the rest being provided by the Islamic Banking Divisions (IBDs), i.e. conventional banks offering Islamic banking. IBDs are more efficient in recovering their loans with their infection ratio clocking in at just 1 percent of their advances. Conversely, full-fledged Islamic banks have an infection ratio of 8 percent. With the growing competition in the Islamic banking industry, the Islamic banks must rethink their asset deployment strategy, which is currently more inclined towards Investments. SME and agriculture sectors which are untapped thus far could be the potential avenues to hit.

Pakistan's Ministry of Finance has set up a committee to explore areas to promote Islamic banking in the nation, including studying converting conventional banks into sharia-compliant ones. Regulators in Pakistan are rolling out a range of initiatives, such as a media awareness campaign, to expand Islamic banks' share of the total banking sector to 15 percent by 2017. The committee will submit recommendations on 10 areas by December 2014, including legal obstacles to converting banks into Islamic ones and changes required to remove those obstacles. Other tasks for the committee include formulating a comprehensive policy framework and timeframes for the industry's progression. The commitee comprises scholars and regulators as well as bankers.

Vision Financial Holdings Limited has shown its intention to acquire 49.11 percent or 492 million shares of Meezan Bank Limited (MEBL), subject to the approval of regulatory authorities. The terms of transaction are yet to be known; however, initial estimates suggest that the deal is likely to settle at a price of Rs47-50/share at premium of 25-30 percent at the current market price. The total size of the deal will be between $214 and $230 million. Interestingly, Noor Financials Investment Limited currently holds 49.11 percent share of Meezan Bank, which is the same proportion required by the acquirer. Therefore, probability of share transfer between the two parties is high. Meezan Bank Limited is currently trading at 136 percent premium to its book value.

General and family Takaful companies are soon going to withdraw their constitutional petition against the Securities and Exchange Commission of Pakistan (SECP), 23 conventional insurance companies and the federation of Pakistan after a prolonged fight with the regulator to restrict competition in the Islamic insurance industry. Takaful operators are said to have struck a deal with their conventional insurance counterparts, which will allow the latter to run Shariah-compliant insurance business through parallel window operations. Some of the biggest players, including State Life, EFU Life, Jubilee Life and Adamjee Life are reported to be eager to launch their Islamic window operations. In fact, some of these companies have vowed publicly to launch window operations within three months of the lifting of the SHC’s restraining order.

Bank Islami Pakistan Limited has planned to issue rights shares up to Rs750 million, as the exemption granted by the State Bank of Pakistan (SBP) for minimum capital requirement (MCR) expired on March 31. The SBP had declined to extend the extension unless Bank Islami improves its equity position substantially. The board of the bank will consider the rights issue at the board meeting scheduled on October 31, where the price of the right shares will be decided. The SBP through a circular increased the MCR for banks up to Rs10 billion to be achieved in a phased manner by December 31. Moreover, the central bank had also advised the bank to submit concrete time bound capital plan by March 31, 2013 to comply with the future and prevailing regulatory capital requirements.

Pakistani BankIslami more than offset the negative effect of discount rate cuts by an growth of 24 percent and 72 percent in its investments and financing, respectively. However, the costly fixed deposits drove up the bank’s mark-up expenses squeezing its spread ratio to 40 percent in 1H CY13 from 43 percent in the corresponding period of last year. Moreover, During 1H CY13, the non-performing loans (NPLs) swelled by 31 percent year on year. Resultantly, provisioning expenses mushroomed by more than four times in 1H CY13. Besides, the bank has been working aggressively to enhance its branch network which piled up bank’s non-mark-up expenses. Whether or not, BIPL enjoys the discount rate hikes will largely depend on how it works on is to improve its CASA (low-cost deposits) and curb its surging NPLs.

Islamic banking industry grew by nearly seven per cent during the second quarter of the calendar year 2013. The momentum in growth, however, started weakening due to increasing base, according to the Islamic Banking Bulletin of the State Bank of Pakistan. The report said the asset base of the industry reached Rs903 billion, registering year-on-year growth of 27pc, while deposits grew by 28pc to reach Rs771bn by the end of June 2013. Profit of the Islamic banking industry reached above Rs4.3bn by the end of June 2013, though lower compared to Rs5.9bn profit registered during June 2012, said the bulletin. During the quarter under review, non-performing financing (NPF) of Islamic banking industry witnessed a slight decline and was recorded Rs19.4bn compared to Rs19.5bn in the previous quarter.

The Islamic Development Bank recently allocated $32.6 million to stop children in Pakistan from suffering paralysis or death at the heads of polio. The disbursement was the first of the $227 million the IDB approved for polio eradication efforts in Pakistan. The disbursement was made through the WHO on August 3. The contribution will be used to help train and support more than 200,000 health workers and volunteers to immunize 33 million children in Pakistan with the oral polio vaccine. The money will also be used to improve immunization services for other vaccine-preventable diseases and to strengthen disease surveillance throughout Pakistan.The WHO expressed its appreciation to the IDB and the OIC as important partners in the growing global effort to eradicate polio.

Pakistan will reportedly receive 250 million Euros from the Islamic Development Bank (IDB) in the ongoing month of August, which is part of 750 million Euros loan. Similarly, the country will also avail the trade facility of $150 million for import of fertilizer and Petroleum products this month. The Islamic Development Bank had agreed to the loan and the trade facility in a meeting between the President of the Islamic Development Bank, Dr. Ahmed Muhammad Ali, and Pakistan’s Finance Minister Senator Ishaq Dar in Jeddah last week. Pakistan will also receive $500 million from Asian Development Bank and $500 million from World Bank in the second half (January-June) of the ongoing financial year 2013-14. Moreover, Pakistan is expecting to receive $3.4 billion from IMF during the current financial year. The loans will help building the foreign exchange reserves, which are currently around $10.25 billion.

The Islamic Development Bank (IDB) has agreed to extend a loan facility of 750 million euros to Pakistan. The first tranche of the loan will be released before mid of the current month. The IDB will also provide a trade facility of $150 million for import of fertiliser and petroleum products. Besides, the IDB president informed the finance minister that Islamic Development Bank was keen to work with Pakistan for the eradication of polio in the country. The President of Islamic Development Bank, Dr Ahmed Mohammad Ali, assured the finance minster Mohammad Ishaq Dar, of the full cooperation and support of IDB for Pakistan.