Islamic finance industry urged to tap into CPEC’s full potential  

Termed an opportunity to channelize excess liquidity into innovative financing instruments, a panel discussion on the China-Pakistan Economic Corridor’s (CPEC) impacts on Pakistan’s Islamic finance industry were brought under discussion, on Tuesday.

Organised by the Institute of Business Administration’s (IBA) Centre for Excellence in Islamic Finance (CEIF), the international forum titled ‘Unlocking Islamic Finance Potential in CPEC and Beyond’ was held at the IBA city campus.

The discussion was led by panellists representing both the governments of Pakistan and China, Islamic finance experts, academicians and regulators. The session focused on how the Islamic finance sector could capitalise on growth opportunities stemming from CPEC and its related projects. 

The corridor, often dubbed a ‘game-changer’ in the South Asian region, primarily consists of US$45 billion worth of aid, provided by China, for domestic infrastructure projects planned by the government of Pakistan.

Since the corridor passed through 27 Muslim countries, it would be wrong to ignore its potential impacts on the field of Islamic finance, observed CEIF Director Ahmed Ali Siddiqui in his opening remarks.

“We should try to reap maximum benefits from this. Considering Pakistani culture and its majority Muslim population, the onus for ensuring that CPEC’s financing was structured in a Shariah compliant manner, lay on us,” he said.

IBA Dean and Director Dr Farrukh Iqbal said the World Bank’s (WB) work was essentially related to long term financing – funds lent for over thirty years for development purposes. Since CPEC was also a development project, Islamic financing was critical for long term development of finance, but it was yet to be properly exploited by Pakistan and other countries, he added.

However, he cited the Islamic Development Bank in Saudi Arabia as an exception. He further elaborated that Islamic finance was a good instrument to use for long term development finance projects.

His comments were followed by Meezan Bank CEO and President Irfan Siddiqui’s keynote address. Elaborating on how CPEC would be a game-changer, he said it was a project that covered 60 countries – more than half of which were Islamic.

The route would reduce the Western China’s distance from Europe by 5000km - a distance taking around 45 shipping days -, consequently reducing the working capital requirement by a quarter.

The financial expert further added that China was the largest spender on tourism, and if one percent of the tourism money - which the Chinese spend worldwide - was invested in Pakistan the amount would be greater than all incomes the country’s tourism industry generates.

“It is important to understand that CPEC is not just China’s need but also Pakistan’s – creating a win-win situation for both.” He further urged the youth to learn Chinese since the country was one of our friendliest neighbours, considering Pakistan’s hostile relations with India and Afghanistan, and sanctions on Iran, which had adversely affected its economy. 

Deputy governor of the State Bank of Pakistan, Saeed Ahmed, in his address spoke on how global policymakers were taking a keen interest in Islamic banking especially after 2007’s recession.