prof. dr. khawaja amjad saeed islamic banking

8/8/2019 Prof. Dr. Khawaja Amjad Saeed Islamic Banking

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AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS

Topic for PresentationIslamic Banking In Pakistan

- Review and Progress

Presentation by

Prof. Dr. Khawaja Amjad SaeedProfessor Emeritus & 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).

Date & Venue

November 02, 2010, Expo Centre, Lahore.

EventThe 4th International Conference & Exhibition on Islamic Banking &

Takaful 2010

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PRESENTATION FRAME

A. Islamic Banking-Inretrospect

B. Growth of Islamic Banks

C. IBIs Financing

D. IBIs Investments

E. Selected Performance Indicators: IBIs & Banking

Industry

F. Future Outlook

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A: ISLAMIC BANKING - INRETROSPECT

1. Vision and Mission of Islamic Banking Department of SBP

2. Strategy for Islamic Banking in Pakistan

3. Historical Rundown

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A-1: Vision & Mission of Islamic BankingDepartment of State Bank of Pakistan (SBP)

State Bank of Pakistan, in its role as central bank, has developed the

following aspects:

1. Vision

To make Islamic Banking the baking of first choice for the providers and

users of financial services.

2. Mission

To promote and develop Islamic Banking industry in line with the best

intersectional practices, ensuring Shariah compliance and transparency.

It is very important that the stakeholders to revisit the above aspects

reflected as vision and mission. Motivated by the enlightened guidance

provided by State Bank of Pakistan, all Islamic Banks must follow

sunshine vision and driving mission. These aspects need to be

indoctrinated in the minds of all stakeholders so that their efforts are

reflected in real life situation as achievement motivation.4


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A-2: STRATEGY FOR ISLAMIC BANKING INPAKISTAN

THREE PRONGED STRATEGY

In Pakistan, State Bank of Pakistan has followed three point

strategy relating to development of Islamic Banks. These strategies

include the following:

1. Full fledged banks can be established in Pakistan.2. Islamic Banks can set up their subsidiaries.

3. Stand-alone Islamic Banking branches opened by conventional

banks in Pakistan. Therefore, flexibility exists in respect of

starting and expanding Islamic Banks in Pakistan.

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B-1: GROWTH OF ISLAMIC BANKS:Some Important Indicators

December 2003-March 2010

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Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of

Pakistan, March 2010, P.3.

Year Total Assets Deposits Netfinancinginvestment

(December) Total Rs.b ShareofIBIs Rs.b Total Rs.b ShareofIBIs Rs.b Total Rs.b ShareofIBIs Rs.b

2003 13 1 8 1 10 1

2004 44 2 30 1 30 1

2005 72 2 50 2 48 2

2006 119 3 84 3 73 2

2007 206 4 147 4 138 4

2008 276 5 202 5 186 4

2009 368 6 283 6 226 52010

(March)

371 6 289 6 229 5


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B-2: GROWTH OF ISLAMIC BANKS BRANCHESDecember 2003-March 2010

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Year(December) Number Base Index NumberofTimes

2003 17 100 1

2004 48 300 3

2005 70 412 4

2006 150 882 9

2007 289 1,700 17

2008 515 3,029 30

2009 651 3,829 38

2010 (March) 654 3,847 38


Pakistan, March 2010, P.3.


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B-4: ISLAMIC BANKING BRANCHES NETWORKAs on December 31, 2009


Pakistan, December 2009, P.18.

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S. No. Province Number %

1. Punjab 290 45

2. Sindh 218 34

3. Khyber Pakhtoonkhwa 70 10

4. Baluchistan 32 55. Federal Capital 31 5

6. Azad Kashmir 07 1

7. Northern Area 1 -

649 100


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B-5: FULL FLEDGED ISLAMIC BANKSAs on December 31, 2009

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S. No. Banks NumberofBranches %

1. Meezan Bank Ltd 166 41

2. Bankislami Pakistan 70 18

3. Emirates Global Islamic Bank Ltd 58 15

4. Dawood Islamic Bank Ltd 42 105. Dubai Islamic Bank Pakistan Ltd 35 9

6. Al Barka Islamic Bank 29 7

400 100


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B-7: CITY-WISE BREAK-UP OF ISLAMIC BANKINGBRANCHES

As on December 31, 2009



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S. No. Province Number %

1. Punjab 38 47

2. Khyber Pakhtoonkhwa 17 21

3. Sindh 12 15

4. Baluchistan 10 13

5. Azad Kashmir 2 2

6. Federal Capital 1 1

7. Northern Area 1 1

81 100


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B-9: MAXIMUM & MINIMUM BRANCHES NET WORKOF ISLAMIC BANKSAS on December 31, 2009



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S. No. ProvinceNumber

Maximum Minimum

1. Sindh/Karachi (Five Cities) 180 1

2. Punjab/Lahore (Twelve Cities) 109 1

3. Federal Capital/Islamabad 31 -4. Khyber/Pakhtoonkhwa (Eight Cities) 28 1

5. Baluchistan/Quetta (Eight Cities 21 1

6. Azad Kashmir/Mirpur AK Muzafarabad 4 3

7. Northern Area/Gilgit 1 -


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C-2: IBIs FINANCING PRODUCTS (Total Rs. 162b)MARCH 2010

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S. No. Products %

1. Murabaha 38

2. Diminishing Musharaka 32

3. Ijarah 14

84

4. Others (Istisna: Salam, Musharaka, Murahaba) 04

100


Pakistan, March 2010, Table 5, P. 5.


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C-3: IBIs NPFs TIME SERVICES

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Period NPFsto Financing Net NPFs to Net Financing Provisionsto NPFD

% % %

March 2009 4.5 2.3 51

December 2009 6.3 3.1 52

March 2010 7.3 3.8 50




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D: IBIs INVESTMENT

1. Composition

2. Types

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D-1: IBIs INVESTMENTS: COMPOSITION

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Particulars Rs.b %

1. Federal Govt Securities 27 37

2. TFCs, Debentures, Bonds & PTCs 25 34

3. Fully Paid up Ordinary Shares 02 03

54 74

4. Others 20 27

74 101

Less: Provision 01 01

Net Investment 73 100




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D-2: IBIs INVESTMENTS TYPES

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Particulars Rs.b %

1. Available for Sale 59 81

2. Held to Maturity 12 16

71 97

3. Others 03 04

74 101

Less: Provision 01 01

73 100




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E: SELECTED PERFORMANCE INDICATORS IBIs &BANKING INDUSTRY

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1. Capital

2. Assets quality

3. Earnings & Profitability


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E-1: SELECTED PERFORMANCE INDICATORS: IBIs& BANKING INDUSTRY

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S. No. Particulars March, 2010

1. CAPITAL IBIs Industry

(Capital to Total Assts) 11.4 10.3

2. ASSETS QUALITY

NPLs to Financing 7.3 13.1

Net NPLs to Net Financing 3.8 4.2

Provisions to NPEs 50.0 70.9

Net NPAs to total to total Capital 50.0 70.9

Real Estate Financing to total Financing 11.3 2.4

3. EARNINGS & PROFITABILITYNet Income to total Assets 0.8 1.1

ROE 7.0 10.9

Net Income to Gross Income 81.1 74.0

Net Interest Income to Gross income 18.9 26.0


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S. No. Particulars March, 2010

Trading & Exchange Gains/Losses to Gross Income 7.0 9.0

Operating Expenses to Gross Income 70.2 51.8

Personnel Expenses to Operating Expenses 32.2 37.4

Spread between Financing and Deposit Rates 7.7 6.6


Pakistan, March 2010, Table 2, P. 3-4.

E-1: SELECTED PERFORMANCE INDICATORS: IBIs& BANKING INDUSTRY


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F: FUTURE OUTLOOK

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1. Forecasts

2. Challenges


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F-1: FORECASTS

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1. By 2012, total of Islamic Banking industry is forecasted as Rs.1 trillion.

2. In the next five years, 1200 branches of Islamic Banks are

vitalized

3. The hope is that it will be 12% of total banking industry


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F-2: CHALLENGES

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We visualize the following future challenges:

A. 15,000 people are needed in the next five years to equip Islamic Banks. In

this respect Universities in Pakistan must respond to this challenge.Curricula must be changed in management education. High Education

Commission should provide motivation in this respect for Universities to

positively respond.

B. Islamic Banks must demonstrate growth with profitability. The top

management must evolve the process to translate the above challenges.C. The scope of services for user may be extended to such areas as micro

finance, agriculture and small & medium enterprises. This will widen the

base of socio-economic development in our country and will address to the

two vital issues in our country namely, promotion of employment

opportunities and alleviation of poverty.

D. Sharia compliant financial services be expanded. Awareness be created inthis respect and logistics be developed as cushion to achieve the above

objective.

E. Differentiated products be developed. Some Islamic Banks have taken

correct initiative in this respect. This areas needs to be logistically well

cushioned.


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