IslamicFinance.de

Shariah-compliant funds in Pakistan say the government’s plan to end a year-long hiatus in local sukuk sales is too little, too late to plug a shortage of assets that has put off their investors. The finance ministry will sell rupee-denominated sukuk once 233.8bn rupees ($2.2bn) of notes mature on November 21. That would be the first offering since it raised 49.5bn rupees in June last year. While Pakistan issued global bonds twice in the past 12 months, it has neglected local investors. A sovereign credit-rating upgrade in June, record foreign-exchange reserves and a narrowing current-account deficit make it an opportune moment to return to the Islamic debt market, after its conventional dollar bond sale in September drew bids for twice the $500mn offered.

The International Monetary Fund (IMF) has welcomed the progress made by the State Bank of Pakistan (SBP) with respect to the capitalisation of the banking sector. In the eighth review of Pakistan’s economic performance under a 36-month loan programme of about $6.6 billion, the IMF said the SBP should continue its efforts to bring a number of small banks into compliance with statutory requirements. After the recapitalisation through a rights issue in the only capital adequacy ratio (CAR)-non-compliant bank in July, it noted with satisfaction that all Pakistani banks have now become CAR-compliant. However, five small banks are still operating below the Rs10 billion minimum paid-up capital requirement (MCR).

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 government is mulling to purchase near maturing Ijara Sukuk worth Rs233.81 billion from the Islamic banks on one year deferred payment term to squeeze surplus liquidity. It is expected to buy Rs233.81 billion Shariah-compliant paper, maturing on 21 November, as no investment option is available for Islamic banks to park their surplus funds of around Rs80-90 billion. The government will buy Ijara Sukuk having issues of GIS9, GIS10, GIS11, GIS12, and GIS13 using Islamic financial concept of Bai-muajjal via open market operation for one year. The Islamic banking institutions are flush with excess cash in the absence of no fresh Sukuk in the market.

Pak-China Joint Chamber of Commerce and Industry (PCJCCI) has called for making the businesses and commercial activities in accordance with Islamic financial laws. The PCJCCI President Shah Faisal Afridi said all stakeholders should understand the limitations at this stage and work towards its advancement to develop an economic system truly reflective of the sacred principles of Islam. According to Global Islamic Finance Report, Pakistan ranked at number nine in the world in terms of development of Islamic financial services industry in the country, and second largest Islamic market (population-wise) after Indonesia, and could become the most important player in Islamic banking and finance, if it attained 20 percent market share.

The State Bank of Pakistan (SBP) has issued ‘Certificate of commencement of banking business’ to MCB Islamic Bank Limited, a wholly-owned subsidiary of MCB Bank. As of June 30, Islamic banking business of MCB was operating with a network of 34 branches having an asset base of Rs21.015 billion. The MCB’s Islamic banking business posted a net profit of Rs408.228 million for the half-year ended June 30, 2015. To augment the existing growth momentum, SBP has prepared the “Strategic Plan for the Islamic Banking Industry of Pakistan 2014–2018”. The plan focuses on initiatives necessary to raise awareness and knowledge about Islamic banking.

Financial inclusion in Pakistan has improved slowly but steadily since 2008 according to most sources. This observation is based upon one topline indicator - percentage of the adult population that is financially included - which is calculated by three different institutions in Pakistan. Depending on what data set you look at, the topline financial inclusion figure for Pakistan in 2014-2015 can be 7% (Financial Inclusion Insights 2014), 13% (Global Findex 2014) or 23% (Access to Finance 2015). Different definitions cause the topline number to vary. The inclusion indexes however do not answer why some remain outside the formal financial sector.

Thanks to a regulatory action last year, the landscape of the country’s Islamic insurance industry is set to change forever with the entry of conventional insurance giants in the Takaful market. Jubilee Life Insurance and EFU Life Assurance, which control over Rs115 billion in total assets between them, have just launched Takaful products. The first set of rules governing the Islamic insurance industry did not allow conventional insurance companies to enter the Takaful market unless they set up stand-alone subsidiaries with separate paid-up share capital. However, the Securities and Exchange Commission of Pakistan (SECP) replaced Takaful Rules 2005 with Takaful Rules 2012 three years ago, which allowed conventional insurance companies to set up Islamic ‘windows’.

The Islamic Development Bank (IDB) will construct 300 schools across Azad Jammu and Kashmir (AJK) to promote primary education in far-flung areas. IDB Programmed Head Shafat Hussain told a meeting of the AJK Planning and Development Department here on Sunday that besides constructing schools in remote areas, teachers of these institutes will also be provided special training. Hussain told the meeting that the project aimed to provide better education facilities to deserving children in far-flung and distant areas. AJK Director Education Syeda Geelani, Director Research Najeebur Rehman and other officials attended the meeting.

Jahangir Siddiqui and Company is going to increase its stake in BankIslami Pakistan by at least 7.4% in coming weeks. According to a note sent out to members of the Karachi Stock Exchange (KSE) on Tuesday, the board of Jahangir Siddiqui and Company has decided to make a long-term equity investment of Rs749.3 million in BankIslami by purchasing 74.9 million shares from Dubai Bank PJSC at Rs10 per share. The shareholding of Jahangir Siddiqui and Company in BankIslami was 21.2% as on June 30. The total stake of the financial conglomerate in the Islamic lender will stand at 28.7% in case the company’s shareholders approve the equity investment decision taken by the board.

The Islamabad Chamber of Commerce and Industry in collaboration with FPCCI Standing Committee on Islamic Banking and Takaful organised a seminar on Islamic banking. Speaking at the occasion, Islamabad Chamber of Commerce and Industry President Muzzamil Hussain Sabri said that there should be full-fledged Islamic banks on micro finance to support SMEs as currently no Islamic bank was focusing on SMEs with better products. He stressed that the branches of Islamic banks should be enhanced in the country to provide more consumer outreach as the insufficient branch network and lack of awareness in general masses were the major hurdle in the growth of Islamic banking.

Khyber Pakhtunkhwa Chamber of Commerce and Industry (KPCCI) have announced to constitute an Islamic banking standing committee. The announcement was made by KPCCI president, Faud Ishaq while speaking at a seminar on 'Islamic banking and Takaful'. Faud Ishaq said the proposed committee will play vital role for provision interest-free banking facilities to business community as per Islamic code and sharia. He urged the Central bank to take measures for promotion of Islamic banking in Khyber Pakhtunkhwa. KPCCI chief expressed satisfaction over 30 to 40 per cent growth in Islamic Banking by State Bank of Pakistan during last six years across the country.

A local consortium led by Al-Karam Group has offered to buy the 144.20 million shares of BankIslami Pakistan Limited (BIPL), which the bank's majority shareholder, Dubai Bank PJSC, tends to sell. The potential acquirer of BIPL's shares came in the limelight after Wednesday's stock filing of Jahangir Siddiqui and Company Limited (JSCL) in which the company disclosed that Dubai Bank PJSC had offered it, along with another shareholder of BankIslami, the saleable 14.3 percent stakes of BIPL. The Dubai Bank was bound, under the Founding Shareholders' Agreement it had signed with JICL and other stakeholders, to first ask, through issuing first refusal, the existing stakeholders if they wanted to increase their shareholdings in the bank.

The State Bank of Pakistan (SBP) held a signing ceremony for Financial Innovation Challenge Fund (FICF) on promoting excellence in Islamic finance in Pakistan under its financial inclusion programme funded by the UK’s Department for International Development (DFID). The signing ceremony marks the beginning of the implementation phase of the FICF innovative Islamic finance education and research projects in partnership with higher education institutions which was earlier launched by Finance Minister Ishaq Dar on January 9, 2015. At the ceremony, three projects were signed with Institute of Business Administration (IBA), Lahore University of Management Sciences (LUMS) and Institute of Management Sciences (IM Sciences).

Dubai Bank PJSC wants to sell its shareholding in BankIslami Pakistan, a stock filing said on Wednesday. Another shareholder, Jahangir Siddiqui and Company, reported that it has received a letter from the UAE-based bank, saying it wants to sell 144.2 million shares in BankIslami Pakistan. The stake that Dubai Bank PJSC wants to sell constitutes 14.3% of the total issued shares of BankIslami Pakistan. Dubai Bank is offering its stake to Jahangir Siddiqui and Company and another (unnamed) shareholder of BankIslami Pakistan under its shareholders’ agreement that mandates a right of first refusal on a proportionate basis.

Dubai Islamic Bank will reportedly advise Pakistan on selling its 40 per cent stake in Kot Addu Power Company (Kapco) as the country’s economic upsurge lifted its benchmark stock market index to a record this month. The emirate’s biggest Sharia-compliant lender would lead an advisory group that includes Deloitte, Lummus Consultants International, and Mohsin Tayebaly and Company. Pakistan has rejuvenated its economy in recent years after the IMF provided a US$6.6 billion bailout loan in 2013. The country, a net energy importer, is also set to gain from the collapse in oil prices and China’s $46bn investment plan to build transport infrastructure connecting the two countries.

Banks surpassed the agricultural credit disbursement target set by the SBP’s Agricultural Credit Advisory Committee (ACAC) for the year ending June 2015. Against the indicative target of Rs 500 billion (which was 28 percent higher than the actual agri credit disbursement of Rs.391 billion in FY14), banks disbursed Rs 515.9 billion in FY15, which was Rs 15.9 billion in excess of the target and 31.8 percent higher than the last year’s disbursement of Rs 391.4 billion, said State Bank of Pakistan (SBP) in a statement. Growth was also recorded in the agri outstanding portfolio which stood at Rs 335.2 billion at end June, 2015.

The State Bank of Pakistan (SBP) and BankIslami have clarified a news story titled “SBP grants Rs20b to BankIslami”. The SBP said it is a normal practice for central banks to provide funds to banks whenever they are under liquidity stress or to meet unexpected deposit withdrawal requests. Liquidity support up to Rs15 billion was offered to BankIslami in anticipation of heavy withdrawal by the depositors of defunct KASB Bank after its amalgamation with the former. This facility, valid for 180 days, is fully secured by the sukuk held by BankIslami. BankIslami said the support it received from the SBP had been used to pay off the depositors of KASB Bank, which to date amounted to more than Rs22 billion.

The State Bank of Pakistan has given a Rs20-billion concessionary loan, including Rs5 billion at an incredibly low rate of 0.01%, to BankIslami to meet capital requirements following the amalgamation of KASB Bank into it. It has highlighted transparency issues pertaining to the BankIslami and KASB Bank amalgamation, as the central bank did not extend the facility through competitive bidding.In protest against the move, a minority shareholder of KASB Bank has lodged a complaint with the National Accountability Bureau (NAB). The complainant, Shaheena Wajid Mirza, requested the anti-corruption watchdog to investigate the SBP governor and other officials of the central bank and Ministry of Finance for alleged corrupt practices and misuse of authority.

The Securities and Exchange Commission of Pakistan (SECP) is in the process of preparing shari'ah compliance regulations for the Islamic capital market. The SECP has chalked out a comprehensive plan for the development of the Islamic capital market in the country. Under the future plan, the SECP will introduce new products for Islamic capital market. The commission would also create awareness on the Islamic capital market. Besides, the SECP is planning to introduce shari'ah audit mechanism. The commission would also adopt new accounting standards on Islamic finance issued by Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The SECP will launch webpage of Islamic finance department for education, promotion and development of Islamic finance.