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Sunday, 12 May 2013

Islamic banking effective for non-Muslim economies

KARACHI: Islamic banking is not merely for Muslims in terms of an interest-free transaction but it is also profitable even for the non-Muslims in economic terms, Daily Times learnt on Saturday.

Meezan Bank Executive Vice President and Head of Consumer Banking and Marketing Muhammad Raza said Islamic banking was launched primarily for Muslims but generally it is also beneficial even for non-Muslims as the representatives from some non-Muslim countries approached him to elaborate the Islamic banking financial model at the end of an International Conference on Housing Finance held in India last month.

He said he was called on the International Conference on Housing Finance on Housing - an engine for inclusive growth organised by National Housing Bank of India in New Delhi last month in which representatives from 12 countries had participated. There he presented Islamic house financing model developed by Meezan Bank. After the conference ended, participants from Nigeria, Japan and Afghanistan approached him, expressed their interest in Islamic banking model and asked to elaborate it to them. He said Meezan Bank has recently provided its advisory services to Sri Lanka.

“This is what we have developed and now is the time to share it with other people, in fact to export it,” he added. Afghanistan has also approached Meezan Bank to share the Islamic banking model, which has been presented to them and is now under consideration.

He cited an example, “United Kingdom has 32 percent Muslim population and is promoting London as an Islamic finance hub.” He said the only reason behind it is that they are aware of its benefits for the economy. “However, being a non-Muslim country they cannot implement it with the name Islamic banking so they would rename it and promote it as ethical banking.”

It points they have began to understand Islamic banking and are working on this, he added.

According to a recent estimate by Standard & Poor’s, the global market potential for Islamic banks is estimated at $4 trillion. The countries like Oman, Nigeria, Tanzania, Uganda and Maldives have opened their doors for Islamic finance and are encouraging new and existing financial institutions to offer Islamic financial services to their customers.

In Pakistan, Raza has estimated the Islamic banking share at 15 percent of overall banking industry by 2015, which now stands at approximately 10 percent. He said the annual growth rate has been 25 to 30 percent. To grow the share at a faster pace, Meezan Bank is also developing some new products for consumer financing like generator financing, motorcycle financing, teen and kid account, old age people account, etc to offer the benefits of Islamic banking to the masses. Branchless banking is also under consideration.

He said some Islamic scholars are the hurdles to some extent on the way to the survival of Islamic banking in Pakistan. “These are the people who are aware of the product but do not want to understand it deeply. By this, they misguide the people and even do not know they are turning people to approach conventional banks as people would have no option for banking after Islamic banking.

(Daily Times / 12 May 2013)

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