Dar advises Islamic banks to roll out new products

ISLAMABAD: Finance minister Ishaq Dar on Tuesday said Islamic banks need to expedite introduction of new products on priority basis in an effort to deepen their presence in the market.

“The existing Islamic banking products should be promoted and work on the introduction of new products in the market should be prioritised,” Dar said at a meeting with Ashraf Mahmood Wathra, governor State Bank of Pakistan and his deputy Saeed Ahmad.

The minister was briefed on the measures being taken for expansion of the Islamic banking sector in the country.

“Islamic banking in Pakistan has recorded a noticeable growth. The proliferation of Islamic banking products will provide the citizens of the country with more banking choices,” a government statement said. “The present government has always supported Islamic banking and issuance of Sukuks during the last three years is a result of the government’s decision to support and promote Islamic banking.”

Analysts said Islamic banks planned new products and policies to support growth after the government’s incentives for the industry.

The government introduced a two percent tax rebate for sharia-compliant manufacturing firms in July while the central bank has exempted Islamic banks from using interest-based benchmarks for some financing products.

The central bank earlier this month cut Islamic banks' statutory liquidity requirement to 14 percent of total demand liabilities from 19 percent.

Dar acknowledged the progress and appreciated the efforts being made in to promote interest free banking in the country and emphasised the need for coordination between all stakeholders for implementation of Islamic banking reforms.

“In this regard, a meeting of the committee for implementation of recommendations on the steering committee for promotion of Islamic banking has also been called by the finance minister on December 3,” the statement said.

The government believes it can pull more people into the formal banking sector -- especially in rural areas -- by expanding the Islamic finance sector, and this could boost economic growth.

The sector is poised to see further official support as the central bank is at an advanced stage of introducing long-term financing facilities for Islamic banks.

Islamic banks profits rose 29.22 percent in the third quarter of the current financial year on increased assets and bigger than ever market share.

Assets of the Islamic banking industry grew 18.3 percent to Rs1.788 trillion during the quarter. Investments of Islamic banks were recorded at Rs663 billion by September 2016.