The third International Finance Conference and Exhibition (IFEC) was held on April 24-25 in Karachi. CFO World and IDG were the media partner for this event. CFOworld is an information resource for senior executives in corporate finance that emphasizes their partnership with information technology. By focusing on this intersection of finance and IT, and how it shapes corporate strategy, CFOworld aims to increase the understanding of finance and IT issues and trends critical to today’s strategic CFO function.
State Bank of Pakistan (SBP) Acting Governor Ashraf Mahmood Wathra, Mufti-e-Azam Pakistan Maulana Mufti Rafi Usmani, Naeem Qureshi, Mehmood Tareen, Mirza Ikhtiar Baig, Dr. Kaiser Waheed, Atiq-ur-Rehman and CEOs from different banks participated in the event to highlight Islamic banking and different challenges faced.
Islamic banking sector has evolved as a growing industry with the inclusion of several automated systems. It has passed through the initial stages of development, but people are curious about what’s next. The most important aspect of Islamic banking is that now the foreign investment in Pakistan has started to come in, which definitely boosts economic activity. Islamic banks all over the world are flushing with the liquidity. They have lots of cash in their pockets and with time project finance and asset finance will significantly flourish. However, the question remains: What does it actually take to bring people to Islamic Banking? Is it the confusion of Haram & Halal or is it about efficiency and state-of-the-art services?
Generally, people are looking for better products and services now in a global village where they can weigh local services and products in the light of international standards. The next step for the expansion and stable growth of Islamic Banking sector is to promote profitable distribution of resources with automated systems – that is the most obvious way forward. It also defines the ideal role of Islamic finance which is to promote profitable distribution of resources. Islamic banks will have their balance sheet with more profitable assets for further growth in the industry when the overall economy flourishes.
Although Islamic banking works more on Riba Free System, people have varied concepts with respect to their religious views. It’s not only the Islamic factor that can motivate people to convert from conventional banking to Islamic because there is a very small percentage of hardcore customers.
Majority of banking customers want good products, rates and competitive services that they can enjoy thoroughly. This is where the IT plays its role. Mohammad Raza, Group Head Consumer, Meezan Bank explains, “You cannot provide good banking services until you are technologically effective in terms of CRM solutions, networking, ATMs. Competition in the market is impossible without having a strong grip over technology – just being an Islamic bank does not help. You need to have a strong IT structure and your products should be competitive – even superior to the conventional.”
There is a specific segment in the industry which is called Big Five. It comprises of National Bank of Punjab, HBL, UBL, Allied Bank and MCB; all these banks have their Islamic banking operations but if we talk about competition, Meezan Bank is the largest player. Started in 2002, it is the first Islamic bank in Pakistan; and it has consistently worked in the area. In a period of less than twelve years, it has grown from 1 branch to 350 branches in 103 cities with a deposit portfolio from nearly 5 billion to 305 billion rupees.
While talking about the competition in Islamic banking sector, Mohammad Imran, Group Head, Islamic Banking at UBL, said, “As far as Islamic Banking is concerned, we have a share of around 10% of the industry. So when you have a 10% of the industry, Islamic banking should not be considering anybody as a competitor. In fact, our competitor is the growth that we see in the industry. I don’t see anyone as a competitor. I look at it as collaboration from different institute.”
UBL is the second largest bank in Pakistan with very aggressive plans for Islamic banking and providing Shariah compliant solutions to its customers. It has 1255 branches throughout Pakistan and there are plans for opening Islamic Windows and Islamic Desks in the near future. It had Imon solution earlier but now UBL has made an indigenous module of symbols at the core banking; and it is being implemented across the board in all the branches.
Advanced automated system and customer solutions are essential for the growth of banking sector, be it conventional or Islamic. With the launch of 3G/4G technology in Pakistan, the demand for efficiency has further increased; and it can bring a rapid change in the mobile and online banking. 3G is about speed and of course it affects the workflow with increased speed. With better speed, companies become more efficient and it attracts the customers. Islamic financing products work on different modes. Housing products run on Musharakah while car leasing is based on Ijarah and it is a rental agreement. Samama on the other hand is about direct sales of items like financing for laptop and generator purchase.
There are several new inclusions and advancements in the Islamic banking sector which need better exposure to bond with other divisions respectively. It has a huge potential for growth as Pakistan is the second largest Muslim country. If the government shows interest it also involves state bank in the scene which can boost expansion.
People are more inclined towards Islamic banking now than before as it has established itself and built trust between general public. In the coming days, with the deployment of advanced automated solutions, it can further play its part and add to overall economy of Pakistan.
