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Posts Tagged ‘Pakistan

Double trouble in Pakistan

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Points of Essence:

  • A period of uncertainty is looming in Pakistan as the internal political troubles are brewing and financial crisis is hitting it hard. It will be a tough time ahead for Pakistan as foreign investments especially from the GCC countries have slowed down since late 2007 and it is further exacerbated with the downgrading of its credit rating by the International rating agencies S&P and Moody’s. The declining foreign exchange reserves which is currently at just over $8bn are barely enough for 10 weeks of imports and the trade deficit ballooning to 53 percent to $5.5bn between July and September and is expanding, will put Pakistan on a challenging economic outlook.
  • The Islamic financial sector in Pakistan however seemed unfazed by the  recent events as all major Islamic banks in the Gulf including Dubai Islamic Bank, Emirates Global Islamic Bank and Al Baraka Islamic Bank are still operating in the country.

By Yawar Mian in Islamabad

The worsening security situation and a deepening financial crisis are continuing to cause pain and panic in Pakistan, the world’s sixth most populous country. Arabian Business reports on the implications for Gulf investors in the country.

When Benazir Bhutto was assassinated last year, the economic fault lines began to widen in Pakistan. Nearly a year on, suicide bombings have become commonplace, while the Sept 20 attack on the Islamabad Marriott shook the nation and the confidence of investors – many of them recently arrived from the Arabian Gulf.

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Written by Suapi Shaffaii

October 20, 2008 at 11:30 am

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Govt launching Ijara Sukuk this week: Akhtar

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Points of Essence:

  • Pakistan Government has launched Ijara Sukuk to enhance its money market sector. This will help Islamic banks to be in parallel with their conventional counterparts in terms of the instruments availability for their liquidity management purpose.

Pakistan is working to launch the first Ijara Sukuk in the first week of Ramadan.

KARACHI: Dr Shamshad Akhtar, Governor State Bank of Pakistan, has said the government and the State Bank were working to launch the first government of Pakistan Ijara Sukuk in the first week of the Holy Month of Ramadan in order to support the efforts to diversify the borrowings mix.

“This will not only help deploy the liquidity available with Islamic banks but also help the government to diversify its debt,” she said in a press statement issued on Thursday.

She added that given the growth in the Islamic banking industry, Shariah-compliant government securities were imperative to bring the Islamic banks parallel to their conventional counterparts in terms of instruments available for liquidity management.

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Written by Suapi Shaffaii

September 8, 2008 at 10:05 am

SBP issues guidelines on ‘Islamic Agriculture Finance’

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Points of Essence:

  • The State Bank of Pakistan has issued a draft guidelines on Islamic Agriculture Finance to facilitate agriculture financing.
  • The guideline covers Islamic modes of financing i.e ‘Murabaha, Ijara, Musawamah, Salam, Istisnaa, Musharakah, Diminishing Musharakah, Mudarabah, Musaqaat, and Muzaraat’ to finance farm and non-farm sector activities including livestock, fisheries, poultry, orchards etc.
  • It applies to Islamic banks and conventional banks with Islamic windows they they could develop their own products to meet the financing needs of agri and rural community in a Shariah-compliant manner.
  • The State Bank of Pakistan is a Council and Full member of the Islamic Financial Services Board.

KARACHI: The State Bank of Pakistan (SBP) issued draft guidelines on ‘Islamic Agriculture Finance’ on Monday aiming at facilitating Islamic banks as well as conventional banks involved in agriculture financing.

A Task Force constituted by governor SBP, on ‘Islamic Agricultural Finance’ has prepared draft guidelines. The Task Force comprised of senior SBP officials, Shariah Advisors and heads of agriculture departments of commercial banks. The draft guidelines broadly cover Islamic modes of financing like ‘Murabaha, Ijara, Musawamah, Salam, Istisnaa, Musharakah, Diminishing Musharakah, Mudarabah, Musaqaat, and Muzaraat’ that can be used for meeting the financing requirements of farm and non-farm sector activities including livestock, fisheries, poultry, orchards etc.

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Written by Suapi Shaffaii

September 2, 2008 at 3:24 am

Pakistan: The causeway for Islamic Finance

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Points of Essence:

  • President Musharraf’s resignation has turned a new leaf in Pakistan’s economy with it poised to be an emerging market alongside Vietnam, Egypt etc.
  • With its total population of 170 million people and a GDP per capita of around $2,900, growing about 7% annually since 2004, Pakistan is keen to reevaluate the role of Islamic finance as its main engine of growth. Currently, there are only 5 Islamic banks and 21 conventional banks with Islamic windows in Pakistan apart from foreign Islamic banks. Obviously, this has to change.
  • Dow Jones Index regarded Pakistan as an Islamic finance causeway between the Gulf Cooperation Council (GCC) and the Far East. However, it remains to be seen as to what other institutions may think of Pakistan.

With General Pervez Musharraf having stepped down as president of Pakistan, analysts are waiting to see what effect this has on the country’s economy. Pakistan could play a key role in the Islamic Finance sector.

New hopes came up regarding the future of the Islamic Republic of Pakistan when President Pervez Musharraf stepped down.

As former US-president Richard Nixon did in 1974, Musharraf avoided being taken out by parliament through impeachment with his preemptive move.

But although Pakistan is mainly seen by outsiders as a country shattered by social unrest and fighting on its border with Afghanistan, its economy has been booming in recent years.

Pakistan, with a total population of 170 million people and a GDP per capita of around $2,900, has been growing about 7% annually since 2004.

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Written by Suapi Shaffaii

August 27, 2008 at 2:52 am

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SBP to include SMEs, agri, micro finance in Islamic Banking soon

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Points of Essence:

  • The State Bank of Pakistan will soon include SMEs, agriculture and micro finance to enhance its existing regulatory framework on Islamic finance in Pakistan.
  • The new approach will aptly apply its 5 regulatory principles to focus on evolving a regulatory framework, enhancing the spectrum of Islamic Banking, strengthening Shariah compliances mechanism, consulting internal and external stakeholders for better liaison and strengthening human resources.
  • SBP targets to enhance market share of Islamic Banking to 12 percent by the year 2012.

By Nauman Tasleem

LAHORE: The State Bank of Pakistan (SBP) would soon include Small and Medium Enterprises (SMEs), agriculture and micro finance to regulate and strengthen Islamic Banking.

This was stated by Pervez Said, Director Islamic Banking Department and Advisor to SBP Governor during the 2nd International Conference on Islamic Banking and Finance held at Aiwan-e-Iqbal on Monday, which was arranged by Al Huda Centre for Islamic Banking and Economics. Bankers from different countries participated in the international conference held to promote Islamic Banking in the country.

He said, “SBP would broaden the horizon of Islamic Banking and agriculture, while SMEs and micro finance would be given special attention in the new policy.”

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Written by Suapi Shaffaii

August 26, 2008 at 3:06 am

Pakistan plans to issue first local currency Islamic bond next month

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Points of Essence:

  • Pakistan will issue rupee-dominated Islamic bond for its domestic market consumption in September.
  • The issuance will be handled by Standard Chartered Bank and Dubai Islamic Bank which would be less than Rs 20 billion than what the market had expected.
  • The Islamic bond will further stimulate the growth of the Islamic finance industry which shared 3.2% of the total banking system in Pakistan and only accounted for Rs 135 billion of assets.

Published: August 15, 2008, 23:58

Kuala Lumpur: Pakistan will issue its first local currency Sharia-compliant bond in September, a government official said yesterday, as the Muslim nation seeks to build its fledging Islamic finance industry.

Ashfaque Hassan Khan, special secretary at the Finance Ministry, said the issue size had not been determined although it would be “substantially less” than the Rs20 billion ($269.5 million) some bankers had earlier expected.

“We have already completed all the paperwork and we hope to be in the market sometime in Sep-tember,” Khan told Reuters by telephone. “This is the first time we will be going to the market with a rupee-denominated local sukuk.”

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Written by Suapi Shaffaii

August 16, 2008 at 2:24 am

Islamic Banking in Pakistan: A consumer perspective

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Points of Essence:

  • The lack of education and awareness about Islamic financial services in Pakistan triggered the consumers’ concerns about the compliance of the Islamic financial services with the Shariah injunctions. This had led them not adopting halal banking products for such uncertainties and also their insecurities about what will happen if credit facilities were taken away.
  • The sharing of profits and not losses is also a major concern which researched had tried to diffuse by suggesting that taking delivery of a set rate of return without having to acquire losses are prohibited and immoral.
  • The top priority among customers is still the quality of services that Islamic banks offer which proved that there should be a shift in the marketing strategy beyond pulling the religious reasonings to meet the demands of sophisticated consumers across all faith and ethnicity.

By Fahad Ramzan

The Idea of Islamic Banking is still hot these days in Pakistan. Either completely new Islamic institute are being emerged or recent traditional banks are opening additional branches focusing in Shariah-based Financing products/services. But still consumers doubt that how much are they Islamic? Three years back, Fazal Ahmed, chief financial officer of the Islamic Investment Bank quoted that “Pakistan followed Malaysia and Bahrain considered the role models of Islamic banking while it formulated its regulations, now Pakistan has the best possible framework for Islamic banking that it can”. But, at the end of the day, government institutions and authorities cannot judge whether they have proved themselves or not while consumers do.

Now, according to the average consumer of the Islamic banks in Pakistan they still have doubt in their mind from the scratch to the main services provided by Islamic Banks.

Consumers would be open to the thought of acquire Islamic banking products and services given that the organization that is offering the service is renowned, and better customer service features such as ATM access, phone banking and so on, are offered. This provides a great prospect for Islamic financial organizations in a market that already have many other competitive existing commercial banks. If Islamic financial organizations can make on their understanding and status in the monetary world, and can offer Islamic banking products/services in non Islamic markets such as Singapore, United Kingdom, Australia, they can plan to increase an emergent consumer base of the local residents in Pakistan, some of who may have beforehand excused themselves from dealing with the usual financial organizations because of the use of interest. The consumers still also believe on the fact the lack of consciousness about some basic concepts and philosophy of Islamic banking. In Pakistan, a number of consumers would not adopt halal banking products because they feel insecure that what will happen if credit facilities were taken away. In the Islamic monetary structure money is not lent out, as an alternative it is an asset-backed scheme where monetary organizations invest in projects.

Consequently, financial organizations deal in equity, not debt. To counter this inadequacy, some banks have started issuing ‘debit’ cards. These cards are alike to the credit cards excluding the actuality that they use the consumers own funds as an alternative of trust on any credit. Another concern is that of sharing profits and not losses. A lot of consumers who have been using the Islamic banking services were not educated about the loss sharing concept earlier. This would designate that some economic organizations have been assuring profits. In fact, it breaches the fundamental law of Islamic financing structure that is, relating compensations to risk. Any kind of money earned on investment without risk is simply interest more willingly than profit.

So, it reveals the fact that, in order to recognize how the Islamic structure makes a distinction between profit and interest, they have to look at the dissimilarities in financial beliefs. Because past experiences have already shown that the rationale of ‘monetary and financial standing’ is very important for a consumer to select a particular bank. In capitalist theory, capital and entrepreneurs are taken care of as two separate identities of production where the first identity acquires interest and the second identity is permitted to get the profit. It is implicit that interest is a fixed return to offer capital, and profit can simply be produced after allocating the fixed return to land, labor and capital. On the contrary, the Islamic monetary system does not regard as capital and entrepreneurs as separate identities of production. It accepts as true that each individual who puts in capital in the figure of money to a business enterprise assumes the risk of loss and as a result is permitted to a proportional share in the actual profit. The system is caring of the entrepreneur, who in a capitalist economy would have to make fixed interest repayments even when the venture is making a loss. Capital has a fundamental aspect of entrepreneurship, until now as the risk of the industry is apprehensive and for that reason, rather than a fixed return as interest, it develops profit. So, as much profit one earn of the business, the more return on capital. The profit would be privileged if there are no fixed interest repayments. In this fashion the profits produced by the money-making activities in the public are uniformly dispersed among those who have given capital to the organization. In this way, an integration of social responsibility and extra Islamic values in rewarding consumers’ needs to be worthy of ultimate consideration as it signifies an excellent and basic discrimination between Islamic and conventional banking systems, and potentially competent to push Islamic banking to better pinnacle in securing consumers’ gratefulness and response.

Top researchers in the area of Islamic Finance have affirmed that assurance made by organizations that consumers will take delivery of a set rate of return without having to acquire losses are prohibited and immoral. Thus far, not only are financial organizations enduring the practice but government societies in Muslim nations are also contributing venture openings with certain income. Taking into consideration, that the Muslim administration is accountable for overseeing the structure in order to battle the prohibited practices of monetary institutes, by giving definite returns; the governments are seen to be overlooking the performance of the monetary organizations. Even though these proceedings may assist Islamic Banks develop in the short run, but in the long run overall cost will prevail over the profit in shape of damage to the repute and legitimacy. Such progress also offer ammunition to the detractors of the system who are previously questioning whether the structure is nothing more than an interest based system operating under the guise of profit.

The most essential information discovered by the past behaviors is that consumer satisfaction over and over again is directly related to the quality of services that Islamic banks offer. The excellence of services comprises of factors like taking care of consumers with politeness and admiration; workforce capability to put across faith and self-assurance; effectiveness and efficacy in managing any operation; and well-informed and attentiveness in offering clarifications and answers relating to the products and services of an Islamic bank.

As a result, Islamic bankers can no more rely only at marketing strategy of pulling religious and holy consumers towards them who might only worry about Islamicity of banking services. Some significant insights acknowledged on the bases of different thoughts of consumer banking selection criterion entails the requirement for Islamic banks to improve its quality of services which is at the present measured as an important success factor that have an effect on an institute’s competitiveness. With respect to the standing of a variety of bank selection criterion, some of these would undoubtedly revolutionize accordingly of people having turn out to be extra conscious of the culture of Islamic banking. For instance, media advertising would be probable to have an extreme good impact on Muslims. The aspiration by Muslims to be compensated a high rate of interest have to decrease. In case of non- Muslims, media advertising may turn out to be well rated accordingly of being uncovered to revealing bank promotion.

Besides this, an additional considerable subject, which needs awareness, is the need to strengthen community learning and understanding towards the distinguishing features of Islamic banks and how it may beneficially go with the concern of consumers in their economic transactions. Islamic banks have latent of being advertised to different sectors of consumers who are worried with the legality of the ability from Islamic viewpoint and those who try to find for service value, handiness and well-organized business. Customer learning programs are for that reason vital if they are to amplify the level of customer consciousness about the distinctive features of Islamic banking and the range of services and products offered by it.

On the whole, after consumers have been uncovered to the ethnicity of Islamic banking, it would be anticipated that consumer’s knowledge of what Islamic banking engages would enhance and their thoughts towards this type of banking should vary. The change would be estimated to be much bigger in local consumers. Similarly with the standing of the different banking selection criterion. Shifts would be likely, extra predominant with banking customers throughout the country.

Source: http://www.pak-times.com

Written by Suapi Shaffaii

August 4, 2008 at 7:25 am

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