Muhammad Arif

Muhammad Arif
Muhammad Arif: Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research ArifHabib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan.

The Eighth Islamic Finance Expo & Conference (IFEC-2019)

                                         The Eighth Islamic Finance Expo & Conference (IFEC-2019 was held on 25th of July 2019 at Marriott Hotel, Karachi, under the theme of “Islamic Finance: Way Forward to the Riasat-e-Madina”. This event was a key initiative in creating the mass awareness of Islamic Finance industry in all the levels of masses and will be attended by the Bankers, Takaful & Modaraba Companies, Investment & Portfolio Managers, Corporate Professionals from IT & Telecom Sector, Entrepreneurs, Industrialists, Regulators / Government Officials, Consultant & Lawyers, Islamic Scholars, Students and General Public.

Apart from Mehmood Tareen, Mr Ateequr Rehman founder of the conference, Mr Farrukh H Sabazwari Chairman SECP, Syed Samar Hussnain ED SBP, Mr Irfan Siddiquii CEO Meezan Bank,Dr Irum Saba from IBA were the prominent speakers. Mr Junaid Esmail Makda President Chamber of Commerce concluded the conference with his appreciating remarks.

It was highlighted in the conference that specifically Regulators should strive to develop market and its products with liquidity management mechanism. Further it was also highlighted that Islamic finance should work for the macroeconomic objectives of the country i.e. to alleviate poverty, control inflation and create employment.

KCCI president Junaid Esmail Makda finally said that the government and regulatory bodies such as the State Bank and Securities Exchange Commission of Pakistan need to develop policies that create more conducive environment for Islamic banks to flourish.

He recommended Public-Private Partnership ventures to bring together researchers, academicians, Islamic Shariah scholars and practitioners for generating innovative ideas to stimulate growth of Islamic finance and overcoming the present-day challenges being faced by the industry. Furthermore, he said that schemes that encourage participation in the development of and use of Islamic banking would provide a better environment for Islamic banks to fulfil their potential. He appreciated the organizers of Islamic Finance Expo.

Islamic Banking with advances through new technologies

Islamic banking has reached at the present time new levels of maturity, facilitated by updated regulations and growing economies and populations motivated by a heightened interest in Sharia-compliant financial innovation and alternative products. In countries with high Muslim proportions, such as those in the Middle East and Africa—where Islamic banking first put down its roots 55 years ago—the industry has become an important element in their development agendas, for it caters to the financial needs of the people without conflicting with their social and religious values.

Both the Middle East and Africa are home to more than 800 million Muslims. These populous and growing regions represent the industry’s future, as they drive the growth of Islamic banking, set industry standards and foster innovation.

The Middle East, overwhelmingly populated by Muslims, is a motherland of Islamic banking and its primary sphere of influence, as Islamic banks enjoy strong support from rich financiers and the abundance of petrodollars. The performance of the sector is improving lately as oil prices pick up, while governments are enhancing regulations to strengthen the industry.

The Fitch Ratings’ 2019 Outlook: Gulf Cooperation Council Islamic Banks report has forecasted a stable outlook for Gulf Cooperation Council (GCC) Islamic banks, reflecting stronger economic growth due to higher oil prices that are set to drive improved gross domestic product (GDP) rates in the region, financing growth and stability for Islamic banks.

With the liquidity of Islamic banks expected to remain strong, this continued potential for growth means that investors are increasingly looking to tap into the various opportunities that Islamic banking offers. Market gaps to better meet Muslim-specific banking needs with dedicated and tailored products fully aligned with Islamic core values are many and varied. Indeed, there is a broader and younger base of customers in the Middle East willing to explore new-generation banking, in terms of offer and efficiency of service, while wanting to bank in line with Sharia law. These market opportunities are underdeveloped still and present attractive platforms for profitable growth for banks eager to exploit the niche.

Fully exploiting the Islamic-banking niche means offering customers who care most deeply about Sharia obedience the flexibility, self-service and low cost of the new alternative branch models as well as alternate channels, the same as conventional banks. The United Arab Emirates’ (UAE’s) largely young Muslim population with a high mobile penetration rate—the highest in the world, according to a new report by Hamburg-based data and research firm Statista—is one such example. The UAE is home to a population of tech-savvy customers, who are eager to embrace emerging technologies that provide a high degree of convenience for their banking needs without compromising on Islamic values and security.

Besides, the UAE is stepping up efforts to promote the development of its small and medium-sized enterprise (SME) community. Sharia’s joint-ownership model particularly suits UAE’s fast-growing SME sector, in which underlying, concrete assets support loans and financing. The innovation-hub and technology-empowered UAE is a positive indicator of the country’s rapid shift towards an inclusive, secure and sustainable digital society.

The global banking industry is at the center of a large digital disruption, with advances in new technologies such as the cloud, business analytics, mobility, block chain and robotics—all of which constitute an opportunity for Islamic banks to reimagine what the banking function should look like in the near future. So far, only key markets are driving the adoption of these technologies. But, with the emergence of a couple of digital Islamic banks, Islamic finance’s reach is expanding into new regions, leading the transformation that arises from technology innovation, and scoping its future direction towards becoming a high-value-added model.

Moving to Africa, where Islamic banking was launched—the continent holds great potential that is now beginning to be realized. According to rating-agency Moody’s, the undeniably faith-driven industry has recently shown strong growth, spreading across 18 major African markets. While countries such as the populous Nigeria stand out as a potential market, interest in Islamic banking is advancing beyond religious grounds in a range of newer locations including Uganda, Ethiopia, Zambia and Mozambique.

As the sukuk sector has taken off, so has a continent-wide industry gained momentum, manifested by the greater participation of an ambitious class. Most of the regions in Africa are underserved by existing financial-services firms. The World Bank 2017 estimates that 30 percent of the people in sub-Saharan Africa do not use formal financial services, owing to religious reasons. Unbanked people with religious concerns provide potential opportunities for Islamic banking to expand in Muslim-majority markets such as Egypt, Algeria, Nigeria, Sudan, Mali and Niger.

According to intelligence firm MIX (Microfinance Information Exchange) Market’s data, the African continent has developed one of the fastest-growing microfinance-institution bases, in recognition of the emerging importance of microfinance as a tool for poverty reduction and sustainable economic empowerment. There is an increasing interest in a whole range of financial services on the continent, including credit for small and micro-enterprises, savings facilities, insurance, pensions, and payment and transfer facilities. Besides, Africa’s young, energetic and aspiring citizens are ripe for financial-inclusion initiatives that could be offered under the umbrella of Islamic banking. With opportunities across the continent, Africa is garnering the title of Islamic finance’s new frontier.

The use of mobile banking has grown exponentially over the past five years, making the continent the global leader in mobile innovation, adoption and usage. As local governments are encouraging initiatives such as ethical banking, rural banking, responsible banking, inclusive banking, green banking and impact investing, this new disruptive technology is helping to overcome the traditional barriers of distance and reach out to previously unbanked customers with low-cost, accessible financial services in line with their culture, ethical and religious affinities.

Paired with block chain’s distributed-ledger technology, digital banking has spurred a dynamic transformation of Africa’s financial markets. While physical access to a bank is a major constraint for low-income populations living in remote areas, the underlying technology is capable of addressing the proximity challenge, digitally empowering marginalized communities living in socio-economic backwardness and information poverty, and is therefore certainly allowing the unlocking of new avenues for the industry’s growth. 

So far, progress has been achieved on many fronts, with a burgeoning Islamic-banking sector shaping the world scene. At the heart of this amazing evolution is an ambitious commitment of all stakeholders to applying a centuries-old banking system to new modalities to empower people, reduce inequalities and promote social, economic and financial inclusion.

Going forward, the active roles played by the different entities, with technology being an enabler, will also help to chart further growth of the industry. Together, collective efforts by various stakeholders including government agencies and regulatory bodies will elevate the Islamic-banking system—the ethical nature of which is even drawing the interest of non-Muslims—to greater heights.

However apart from above, for Islamic banking, the best is yet to come.


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