Experts call for using Islamic finance to end poverty

ISLAMABAD: Speakers at a conference on Wednesday urged the need for exploiting the emerging potential of Islamic Banking and introducing Shariah-complaint financial products for the development of small and medium enterprises (SMEs) as well as promoting financial inclusion.

They said Islamic finance could play a critical role in economic development, poverty alleviation, and enhanced prosperity and stability. The two-day conference on 'financial inclusion strategies in South Asia: methodology and perspectives' was organised by Zarai Tarqiatie Bank Limited (ZTBL) and World Bank in collaboration with Association of National Development Finance Institutions in Member Countries of the Islamic Development Bank (ADFIMI).

The event was organised with an aim to promote financial inclusion, to eliminate poverty and promote microfinance, as well as to create awareness of the importance of financial inclusion.

The other objective of the event was to review the state of financial inclusion in South Asia, and share the good practices of member countries to promote Islamic finance and development of SMEs in the region. Head of World Bank Global Islamic Finance Development Centre Dr Zamir Ahmad said the total unbanked population was registered at 73 percent, and out of the total 22 percent unbanked, 22 percent were in Muslim countries.

He said in Pakistan, the unbanked population was recorded at 5.2 percent, Bangladesh 3.7 percent, Indonesia 20.6 percent, China at 11 percent, and India at 29 percent. According to a study jointly organised by World Bank and Islamic Development Bank, over 37 percent population refused to invest in conventional banking, he added.

Dr Zamir said currently more than 15 percent of the overall banking sector comprised Islamic finance, and was included in the development agenda of G-20. The interest in Islamic banking and finance was increasing in non-Muslim countries including UK and Germany for its strong fundamentals, he added. Ahmad Ali Siddiqui, executive vice president and head of Shariah department of Meezan Bank, said over 700 Islamic financial institutions were operating, as the total size of Islamic finance had reached $1.8 trillion.

He said local share in global Islamic finance was one percent with a huge scope to expend, as demand for Shariah-complaint financial products was increasing.