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Islamic Finance in Pakistan


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


Pakistan Stock Exchange (PSX) has won Global Islamic Finance Award 2021 for “Best Islamic Stock Exchange” for its outstanding achievements in the field of Islamic finance.

GIFA is an international forum that recognizes governments, institutions and individuals who have exhibited outstanding achievements in their respective fields, contributing to the sustainability of Islamic banking and finance as a viable system within the global international financial architecture.

Speaking on the occasion, PSX Chairperson DrShamshadAkhtar said: “It is an immense achievement for Pakistan Stock Exchange to have won the Best Islamic Stock Exchange Award 2021 presented by Global Islamic Finance Awards.”

“Islamic equity and debt products form a large portion of the demand in international capital markets,” she said, adding that the stock market winning this accolade shows that it is a premium platform for listing and investing of Islamic capital market products.”

“Both PSX and Pakistan have been working for many years to introduce Islamic modes of financing, in both the banking and capital markets. This has filled a real need of the financial sector customers,” she maintained.

 Islamic housing finance is expanding at a fast pace in Pakistan and the new scheme that facilitates overseas Pakistanis to buy a house for themselves or their families in Pakistan provides Islamic banks an opportunity to increase their footprint in the country’s mortgage market, bankers said on Friday.

Islamic home finance has more than 55 percent of the overall housing finance market in Pakistan, and monthly mortgage finance acquisition has increased from Rs1 billion to Rs4 billion in one year. The total housing finance in Pakistan is Rs110 billion, and Shariah-complaint financing is around Rs65 billion, “Each NRP (non-resident Pakistani) has a dream to own a home in Pakistan. We expect the RoshanApnaGhar scheme to help boost Islamic mortgages in the future. The overseas Pakistanis have more savings and liquidity so they are likely to avail this facility at a higher level than expected.” Activity in the construction sector impacts multiple industries in the country and increases employment.

To boost it The State Bank of Pakistan has launched a new product RoshanApnaGhar for NRPs last week. Under this, two types of financing facilities are being offered. First, standard financing in which both lien-based and non-lien-based financing is available. In lien-based financing, the NRPs can obtain house finance facility against a lien on their Roshan Digital Account (RDA) deposit balances or Naya Pakistan Certificates.

Ahmed Ali Siddiqui, director IBA CEIF and group head Shariah compliance at Meezan Bank, in a presentation on “Islamic banking basic concepts and product structure for Islamic Home Finance” said to get a good house is considered as a basic need of a person and is also a source of happiness and blessing.

“Conventional housing loans are based on Riba and are not in line with the Islamic rules, hence many customers avoid it due to religious reasons, Islamic housing finance is now effectively helping the customer and a vast majority of the customers are now shifting towards Islamic schemes,” Siddiqui said.

The tenor for the facility is from 3 to 25 years. It offers attractive rental rates. The financing under Mera Pakistan MeraGhar is also applicable (if the customer qualifies the criteria).

Islamic financial institutions (IFIs) enjoyed good earnings results in 2019 across the main geographical regions of the Middle East, Africa and Asia. Primarily enlarged asset bases drove increased net profit with good demand for financing.

Winners of Global Finance’s 2020 Islamic Finance Awards achieved improved financial performance together with a widened product portfolio, enhanced service, technology investment and growth in their banking and market reach. As a group, the leading Islamic banks recorded increased net profit of 20% in 2019; and their average return on assets was a healthy 1.9%. Margins remain wider than at conventional banks, supported by a low-cost deposit-funding base. IFIs’ expense bases are efficient, with sound cost-to-income ratios.

Early in 2020, Global Finance’s winner as Best Islamic Project Finance Provider, Dubai Islamic Bank, acquired Noor Bank. It is expected that consolidation between Islamic banks will continue over the next few years as institutions seek to maintain a competitive position and further rationalize their operating cost base.

The Islamic sukuk (bond) market was stronger in 2019, with global issuance rising 26%; key markets in the Gulf Cooperation Council area and Malaysia were strong. Standard Chartered Saadiq, our winner as Best Sukuk Bank, was a leading player on many prominent issues. Along with numerous large sovereign sukuk issues, first-time flotation of green sukuks was successful; and this bond type is now widely forecast to establish a niche for itself.

However, the outbreak of Covid-19 is expected to have a major impact on Islamic institutions, just as it has on conventional banks. Lower financing demand, reduced fee income and additional subsidized financing will hit revenues. Nonperforming facilities are forecast to rise, although they may not be booked this financial year. Impairments will rise as well.

Best Islamic Financial Institution Kuwait Finance House
Best Islamic Corporate Bank Samba Financial Group
Best Islamic Retail Bank MayankIslamcBerhad
Best Islamic Sukuk Bank Standard Chartered Saadiq
Best Islamic Investment Bank Samba Financial Group
Best Islamic Fund Manager Kuwait Finance House
Best Islamic SME Bank Qatar Islamic Bank
Best Islamic Asset Manager Boubyan Capital
Best Islamic Trade Finance Provider Abu Dhabi Islamic Bank
Best Islamic Takaful Kuwait Finance House
Best Islamic Project Finance Provider Dubai Islamic Bank
Best Sukuk Deal of the Year AAA-rated €1billion ($1.08 billion) green sukuk via the Islamic Development Bank and Standard Chartered
In Pakistan Meezan Bank remained best Islamic bank in the country  


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