ISLAMABAD -  Assets in Islamic Banking doubled between 2012 and 2016; jumping from Rs837 billion to Rs1.6 trillion, and now account for 11.7 percent of the total banking assets.

There is an even stronger growth of Islamic assets in the non-banking financial institutions (NBFI). Their market share is now approaching 33 percent from only 14 percent in 2012.

Two reasons that help explain this growth are demand from customers and enabling regulations by the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP).

This growth in Islamic finance and the role of regulation was highlighted at a seminar at the SECP’s head office here on Saturday.

Speaking on the occasion, Usman Hayat, head of the Islamic Finance Department at the SECP, explained that developing Islamic capital market was a priority for the regulator. “The SECP has recently conducted two consultative sessions with market participants to facilitate issuance of Sukuk and real estate investment trust (REIT),” he said, and added, “The SECP is analysing the industry proposals and it will consider making appropriate amendments to the relevant regulations, further reducing the cost and hassle for both issuers and investors. The industry proposals pertaining to tax issues regarding Sukuk and REIT are being referred to the FBR.”

Ghulam Muhammad Abbasi, head of the Islamic Banking Department at SBP, made a comprehensive presentation on the evolution of Islamic Banking in Pakistan.

He informed that after a prolonged debate about which model to be followed, the policymakers decided in 2001-02 to allow both Islamic and conventional banking in parallel. 

“At present, 21 banking institutions are offering Islamic banking services in the country through 2,322 branches in 112 districts across the country,” he said, and added, “SBP has a holistic approach to the promotion of Islamic Banking and is providing enabling policy environment, Shariah governance, risk management and capacity building.”

He recalled that the SBP had been voted as the “Best Central Bank for Promoting Islamic Finance” by Islamic Finance News in 2015.

Dr Shafiullah Jan, from IM Sciences, said that the economic substance in Islamic Banking might look the same, but the underlying process was different. “Along with growth of the industry, more attention needs to be paid as to why this industry was created and if it is delivering according to the Islamic vision of development that it is associated with,” he underscored.

The SECP had organised the seminar in collaboration with the SBP and the Centre for Excellence in Islamic Finance at the IM Sciences Peshawar.

Representatives of the SECP, SBP, Ministry of Finance, Zarai Taraqiati Bank, Central Directorate of National Savings and the faculty and students from IM Sciences attended the event.