‘Risk-sharing Islamic finance attracts global attention’

LAHORE: Islamic banking has grabbed enormous attention from around the world due to its rapid growth, resilience to financial crises, and principles of investment in real assets and risk-sharing, a senior economist said on Wednesday.

“International Monetary Fund (IMF) has endorsed the principles of Islamic finance, acknowledging it can help promote macroeconomic and financial stability,” Punjab Finance Minister Dr Ayesha Ghous Pasha said while addressing the 5th Global Forum on Islamic Finance by COMSATS Institute of Information Technology.

“The prescripts of risk-sharing and asset-based financing encourage better risk management for both financial institutions and their customers, while they discourage credit boom.” 

Dr Ghous observed that as a fast-growing emerging market and a major economy within the countries of the Organization of Islamic Cooperation (OIC), Pakistan has a mature financial industry that has been focusing on broadening the Sharia-compliant sector of 190-million-strong nation. 

“Islamic finance is expected to take off in Pakistan in coming years on the back of new regulations on Sharia-compliant banking, new industry-supporting regulatory bodies, and a rising demand from foreign investors,” the provincial minister added. 

She told the audience that Pakistan's Islamic banking industry has been growing at a rate of over 30 percent per annum over the past five years, which is above the average global rate. “If this trend continues, it can be expected that by 2018 Islamic banking assets in the country would be worth $17.6 billion,” Dr Ghous said. 

The minister highlighted that this growth is supported by the strategy of the State Bank of Pakistan (SBP) that seeks to double the number of Islamic banking branches down the line. 

“The government is serious in supporting the growth of Islamic banking and has taken steps required for effective implementation of Sharia-compliant finance with the latest being the formation of a task force to recommend amendments in legal and regulatory framework,” she said.

She stressed the issuance of Sukuk bonds in the last three years, including the recent launch of $1 billion international Sukuk, was a proof of the government's commitment to the furtherance of Islamic finance. "We are exploring options of Islamic borrowing instruments at provincial level also," the minister added.