National Bank of Pakistan (NBP) on Wednesday sought help of government and the central bank to increase market share of Islamic banking industry, which stands at merely 12 percent despite a huge demand for shariah-compliant products in the country.
Saeed Ahmad, president and chief executive officer at NBP said the current market share of 12 percent of Islamic banking “leaves a gap of 62 percent.”
“It will not be possible for Islamic banking to achieve its full potential without support from SBP and the government,” Ahmad said, addressing a seminar held as a part of awareness drive for Islamic banking and finance. “Seventy percent of consumers prefer Islamic banking (in Pakistan),” he added, citing a study titled “Knowledge, Aptitude and Practice” commissioned by SBP and UK’s Department for International Development. NBP chief, however, acknowledged the positive and supportive role of the regulatory authority, State Bank of Pakistan, for continuously promoting Islamic banking sector and facilitating approvals for the conversion of conventional branches into Islamic banking branches.
SBP, in a report, said the share of Islamic banking reached to 11.7 percent in terms of assets and 13.3 percent in terms of deposits by the end of last year. There were 2,322 branches of 21 Islamic banking institutions in 112 districts across the country as of December 2016, it added.
Ahmad of NBP said Islamic banking fits well in the government’s national financial inclusion strategy, which aims to achieve 50 percent financial inclusion by 2020. “The biggest characteristic of Islamic banking is that it’s related to real economic activities and there is no place for excessive risk taking or speculative activities,” he said.
NBP head advised Islamic banks to have open dialogue with scholars in mosques to remove their reservations and misunderstanding. “This will create a flood of demand for Islamic banking,” he said.
He said NBP’s Aitemaad Islamic Banking has achieved a score of 134 Islamic banking branches all over the country. “Future of Islamic banking industry is very bright but it requires passion and dedicated efforts from all those associated with it,” he added.