1. 1 ALHUDA CENTRE OF ISLAMIC BANKING & ECONOMICS Event 3 rd International Conference & Exhibition Focus Islamic Banking & Takaful PRESENTATION BY Prof. Dr. Khawaja Amjad Saeed Founder Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan (2003----), Member Governing Council, International Federation of Accountants (IFAC), New York (1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan (1997-2000), President, Association of Management Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1973-1996). Venue & Date Islamabad, November 02, 2009 Topic Islamic Banking in Pakistan – A Review

2. 2 PRESENTATION FRAME A.Vision and Mission for Central Bank and its Islamic Banking Department B.Strategy for Islamic Banking in Pakistan C.Historical Rundown D.Quantitative Analysis E.Future Outlook

3. 3 1.State Bank of Pakistan Annual Report 2008-09, Karachi: SBP, P. 42. 2.Frequently Asked Questions (FAQs) on Islamic Banking, Karachi: SBP-Islamic Banking Department, February 23, 2009, PP 1-35. 3.Pakistan’s Islamic Banking Review: 2003-2007, Karachi, SBP: Islamic Banking Department, PP1-77. 4.Strategic Plan for Islamic Banking Industry of Pakistan, SBP: Islamic Banking Department, N.D, PP 1-57. 5.Risk Management Guidelines for Islamic Banking Institutions, Karachi, SBP-Islamic Banking Department, January 02, 2008, PP 1-19. 6.Islamic Banking Bulletin: Karachi: SBPL Islamic Banking Department, June 2008. 7.Islamic Finance: Opportunities and Challenges Karachi, SBP: A Collection of Speeches by Governor SBP from 2006- 2008 PP 1-37. SOURCES:

4. 4 A: PAKISTAN: VISION & MISSION FOR CENTRAL BANK AND ITS ISLAMIC BANKING DEPARTMENT SBP-for the Central Bank VISION SBP-for the Islamic Banking Department VISION To Transform SBP into a modern and dynamic central bank, highly professional and efficient, fully equipped to play a meaningful role, on sustainable basis, in the economic and social development of Pakistan. To make Islamic banking the banking of first choice for the providers and users of financial services.

5. 5 SBP-for the Central Bank MISSION SBP-for the Islamic Banking Department MISSION To promote monetary and financial stability and foster a sound and dynamic financial system, so as to achieve sustained and equitable economic growth and prosperity in Pakistan. To promote and develop Islamic Banking industry in line with best international practices, ensuring Shariah compliance & transparency. A: PAKISTAN: VISION & MISSION FOR CENTRAL BANK AND ITS ISLAMIC BANKING DEPARTMENT

6. 6 THREE PRONGED *Full fledged Islamic Banks in Pakistan Sector *Conventional Banks to set up (a)Islamic Banking subsidiaries (b)Stand alone Islamic Banking Branches B: PAKISTAN SBP STRATEGY FOR ISLAMIC BANKING

7. 7 1. PAKISTAN Created out of Islamic Ideology 2. QUAID-E-AZAM Inaugural Speech of SBP of July 01, 1948 3. CONSTITUTION OF PAKISTAN Article 38 (f) “The state shall-----eliminate riba as early as possible”. 4. Inretrospect 1970s:- Efforts started to eliminate riba. 1980s:- Bold and comprehensive initiative. - Pakistan among three countries in the world for interest free banking. C: PAKISTAN ISLAMIC BANKING HISTORICAL RUNDOWN

8. 8 4. Inretrospect 1980s:- Review of Laws -SBP Act -Companies Ordinance 1984 -Recovery Laws -Negotiable Instrument Act - June 26, 1980: PTC-New Interest free instrument of corporate financing - NIB-12 modes - January 01, 1981, separate interest free counters - July 01, 1982-Musharaka for working capital needs of trade & industry - April 01, 1985-profit & loss sharing basis. C: PAKISTAN ISLAMIC BANKING: HISTORICAL RUNDOWN

9. 9 4. Inretrospect 1990s:- Federal Shariat Court: November 1991 - December 23, 1991 “Laws involving interest would cease to have effect finally by June 30, 2001” 2000s- January 2000, Commission for Transformation of Financial System constituted in SBP - Task force set up to suggest ways to eliminate interest from govt financial transactions - Conclusion-Parallel Banking system C: PAKISTAN ISLAMIC BANKING HISTORICAL RUNDOWN

10. 10 1. Islamic Banking-Year wise entry 2. Islamic Banking Industry Progress 3. Islamic Banking Industry Progress -Selected Indicators 4. Trends in Islamic Banking D: QUANTITATIVE ANALYSIS

11. 11 D1: PAKISTAN: ISLAMIC BANKING: YEAR WISE ENTRY YearNumber 2003 4 2004 5 2005 2 2006 6 2007 2

12. 12 D2: PAKISTAN: ISLAMIC BANKING INDUSTRY PROGRESS Particulars20032004200520062007 1. Full fledged Islamic Banks (IB) 12246 2. Branches of IBBs10233793186 3. Conventional Banks with IBBs 39912 4. Branches of Conventional Banks 7253357103 5. Total Islamic Banking Institutions (1+3) 411 1618 6. Total Number of Branches (2+4) 174870150289 D E C E M B E R NUMBER

13. 13 D3: PAKISTAN: ISLAMIC BANKING INDUSTRY PROGRESS: SELECTED INDICATORS Particulars20032004200520062007 1. Total Assets0.51.52.02.84.0 2. Deposits0.41.31.82.03.8 3. Financing & Investment0.51.31.72.33.5 DECEMBER GROWTH PERCENTAGE

14. 14 D4: PAKISTAN: TRENDS IN ISLAMIC BANKING ParticularsJune 2004 June 2005 June 2006 June 2007 June 2008 1.Deposits133860107163 2. Financing & Investments 13375889163 3. Total Assets195488158230 Source: Edited from: SBP Report 2008-09, P. 43. BILLION RUPEES

15. 15 E: PAKISTAN: ISLAMIC BANKING: FUTURE OUTLOOK 1. Forecast -2012 -Total Assets of Islamic Banking Industry: Rs. 1Trillion -1200 branches in 5 years -Deposits: Rs. 1 Trillion -12% share of total banking industry 2. Challenge/Opportunities -15,000 people needed in next 5 years -Shariah compliant financial services -Increased interest from GCC investors -SME, micro finance, agriculture -Demonstrate growth with profitability -Differenciated products

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