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The combined pre-tax profit of the Islamic banking industry surged to Rs4.8 billion in the first quarter of 2015, which depicts 48% growth on a year-on-year basis. The rise in the profitability of the Islamic banking industry in January-March was mainly on the back of earnings growth of 95% recorded by Islamic banking divisions (IBDs) of conventional banks. In contrast, the combined profitability of Islamic banks increased 17.6% in January-March on an annual basis. Assets of the Islamic banking industry grew by 28.2% in January-March on an annual basis to Rs1.3 trillion. Similarly, its deposits stood at Rs1.1 trillion at the end of March after recording a growth of 28.7% over the preceding 12 months.

Securities and Exchange Commission of Pakistan (SECP) has approved a four-member sharia advisory board to oversee Islamic financial products in the country, as the regulator looks to address credibility concerns. The board, which comprises three religious scholars and a technical member, would advise SECP on a range of issues including the operation, auditing and reporting of Islamic mutual funds, pensions and insurance operators. Besides, in February, the SECP published long-awaited rules for the issuance of sukuk as part of efforts to strengthen governance and broaden their appeal to investors. Oman's central bank set up a sharia supervisory board last October, with Bahrain and the United Arab Emirates also developing a similar country-level approach to the industry.

The first Rs 22.237 billion Islamic rental property fund of the subcontinent was launched at Karachi Stock Exchange (KSE) Monday. The two-day book building process for the country's first Rental Real Estate Investment Trust (REIT), Dolmen City REIT (DCR), was initiated by Sindh Finance Minister Murad Ali Shah here at KSE trading hall. The initial public offering (IPO) envisages a total of 555.92 million units, 75 percent or 416.94 million shares would be offered to institutions and high net worth individuals (HNWIs) through book building on June 8-9. The balance 138.98 million or 25 percent units would go to retail subscribers on June 12.

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.

MCB Arif Habib Savings and Investments Limited ("MCBAH") has announced that it has appointed a Shariah Supervisory Board under the Chairmanship of former Justice Mufti Muhammad Taqi Usmani for their existing as well as future Shaiah Compliant Mutual Funds, Voluntary Pension Schemes (VPS), Administrative Plans and Shariah Compliant Investment Advisory Mandates. Other members of the Shariah Supervisory Board are Dr Muhammad Zubair Usmani and Dr Ejaz Ahmed Samdani. Apart from advising MCBAH on Shariah matters, the Shariah Board will give expert guidance in introducing and implementing new investment models and products based on international Shariah research.

BankIslami Pakistan Limited formally started an Internal Hiring program for former KASB employees to help them assimilate better in the amalgamated entity. While interacting with former KASB employees at the launching ceremony of the Internal Hiring initiative, Mr. Hasan A Bilgrami, CEO BankIslami, reiterated that the Bank shall ensure maximum job security and adjust the staff in internal placements by training them in Islamic Banking as well as other job related skill set.

As Pakistan continued its trend of looking for a helping hand to increase foreign exchange reserves, this time will take a loan of $1billion from Islamic Development Bank (IDB) and ask China to extend its term of the previous $1billion loan it detained earlier. The move has also been taken to support rupee against Dollar by raising $2billion in its foreign resources in the financial year 2015-16. According to an official from the Ministry of Finance, the government will take $1billion from from International Islamic Trade Finance Corporation (ITFC) of the Islamic Development Bank to finance crude oil imports, which will lend the money under a short-term Murabaha financing arrangement.

State Bank of Pakistan informed that the amalgamation of the defunct KASB Bank into Bank Islami Pakistan Ltd has been implemented smoothly. As a result all the depositors which are over 150000 in number and have Rs 57 billion in deposits are free to operate their accounts. Many of them have already started operating their accounts and more than 1200 employees have continued their jobs, a statement of SBP said. An important issue is the notional value at which the defunct bank has been handed over to BankIslami. Following international practices, a notional value of Rs 1000 was set for the defunct bank. BankIslami has planned to gradually transfer the defunct bank's conventional banking operations into Shariah based operations.

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.

The federal government has approved the merger of KASB Bank Ltd with BankIslami Pakistan Ltd (BIPL). KASB Bank had been in trouble since 2009 as it failed to meet the Minimum Capital Requirement (MCR) and Capital Adequacy Ratio (CAR). The case became complicated when a Chinese company showed interest in buying the bank but the request was turned down by the SBP. However, the SBP clarified that the Chinese company neither had required capital nor was willing to show its credential as required by the SBP’s fit and proper condition needed to run a bank. All branches and customers of the former KASB Bank will be considered as BankIslami’s from Friday.

The make-up of Islamic banks' loan books is changing in Pakistan and Indonesia with the growing use of profit-sharing contracts that could help Islamic finance win more customers in the two largest Muslim-majority countries. Murabaha has been the workhorse of Islamic bank financing globally, but after years of dominance the structure is losing favour in some areas to profit-sharing contracts such as musharaka, istisna and salam, which are seen by many scholars as closer to the economic principles of Islam. In Indonesia, the change is more gradual as murabaha still represents over half of all financing by Islamic banks.

The State Bank of Pakistan feels that under the current circumstances, merger of KASB Bank with Bank Islami is a viable option wherein the bank’s depositors’ interest would be safeguarded and its problem would be resolved on a sustainable basis. Although there is a possibility of foreign investment worth $100 million from a Chinese investor yet the State Bank is concerned of the safety of depositors’ money and prompt payments to them. At the same time SBP does not want to fall in any conflict with the shareholders. Considering the fact that Chinese investor company called Cybernaut was not able to establish its bonafide even after elapse of considerable time their request was declined on 27th April 2015.

Every fourth person on the planet is Muslim. However, the vast majority of them happen to be among the poorest in the world. However, there is a growing middle class in the Muslim world, including Pakistan, of which the upper sub-segment called the ‘mass affluent’ may potentially be relevant to wealth creation and subsequently to the business of wealth management. Muslim high-net-worth individuals (HNWI) hold an estimated $3.35 trillion, which is less than 30% of the total Islamic wealth. The remaining 70% is held by Muslim businesses, Islamic financial institutions, the mass affluent, and by the governments in the OIC block.

Despite a robust mobile money market, six years after the launch of the first branchless banking product, the number of active, registered mobile money accounts in Pakistan stands at only 0.4% of the population. The percentage of users of mobile money products, however, is 7%, which means that the majority of the customers prefer to transact over-the-counter via an agent. However, true financial inclusion only results when customers open their own mobile money accounts. It is only then that customers can avail of more advanced financial products such as insurance, savings, and credit. Hence, mobile money accounts are an important indicator for financial inclusion.

Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi said on Wednesday the regulator is looking to enhance Shariah compliance in the capital markets by restructuring and reorganising the Islamic capital market. Speaking at the fourth Islamic Finance Expo and Conference as chief guest, Hijazi discussed in detail the roadmap for the promotion of Islamic finance in Pakistan. He added that the SECP is centralising the Shariah-related capital market activities besides improving the regulatory framework for Takaful, Modarabas, Islamic mutual funds, Islamic pension funds and Islamic real estate investment trusts (REITs).

Pervez Said is no stranger to adversity. In his 33 year-long career, he has worked with 10 different organizations, having served as chief executive at four different institutions. He is considered to be the pioneer of Islamic banking in Pakistan due to his instrumental role at the State Bank of Pakistan in the formative years of Islamic banking. But his current stint at the House Building Finance Company may well be the biggest challenge he has taken on yet. You can find excerpts from a recent interview in which Said discussed the housing crisis in Pakistan and the role HBFCL is playing in alleviating it following the article link.

The Federal Investigation Agency (FIA) has expanded the scope of its investigations to two more insurance companies and detained three persons in a case that involves a huge embezzlement on account of oil products' insurance. FIA has taken into custody three persons and has also identified two more persons. The insurance companies had entered in a deal with one of the biggest oil refineries in 2002 to insure oil consignments imported in Pakistan. In this deal, insurance companies had earned a commission Rs 152.39 million at a total premium of Rs 950.23 million and these companies in order to conceal this earned amount withdrew the same through various cheques of 170 fake agents.

The Securities and Exchange Commission of Pakistan (SECP) has envisaged a roadmap for restructuring and reorganising the Islamic capital market. The initiative aims at the promotion of Shariah compliance in the capital market of Pakistan. The roadmap entails centralisation of the Shariah-related capital market activities, introduction of uniform Shariah Regulation for the takaful, modarabas, Islamic mutual funds, Islamic pension funds, Islamic REITs, other Islamic financial institutions (other than banking), Shariah compliant (Non-financial) Companies, Islamic products and instruments.

In an opening ceremony Finance Minister Ishaq Dar expressed his pleasure to the State Bank of Pakistan which has been supportive to such initiatives like the Centre of Excellence in Islamic Finance Education (CEIFE) which strengthens the efforts to increase Islamic banking and finance.
The Islamic finance industry had reached US$ 1.8 trillion in the last 40 years according to SBP Governor Ashraf Mahmood Wathra. According to experts, the Shariah compliant assets globally are expected to grow up to 20% annually and financial assets will probably reach US$5 trillion by 2020. Pakistan, by the end of 2018, would have reached an overall share of Islamic Banking of 15%, currently 10%.