SBP chief lauds Islamic banks performance

State Bank of Pakistan Governor Salim Raza has said that the performance of Islamic banks has been impressive compared to their conventional counterparts during the last two years.

Speaking at a opening ceremony of 10 more branches of Dubai Islamic Bank here on Wednesday, the SBP governor said due to active support of the central bank the total assets of Islamic banking industry had grown to Rs323 billion up to September 2009 while their deposits reached to Rs245 billion.

Mr Raza said that in terms of market share the total assets and deposits of Islamic banks account for 5.3 per cent and 5.5 per cent of the conventional banking industry, respectively.

He said cumulative growth rate of Islamic banking industry had remained above 55 per cent since inception despite a healthy growth in conventional banks.

The growth rate had slowed down during 2008 and 2009 due to global economic down turn, however, when compared with their conventional counterparts it was impressive by all counts, he remarked.

The SBP governor said that last year the central bank had unveiled its Strategic Plan for Islamic banking that broadly outlined the future direction of Islamic banking until 2012.

‘Our target is to increase the share of Islamic banking to 12 per cent of total assets of the banking sector,’ he added.

He pointed out that branch network of six full-fledged Islamic banks and 13 conventional banks with dedicated Islamic banking branches increased to 560 branches.

Raza said that the central bank was determined to ensure a level-playing field for the Islamic banking industry and it had put in place a robust regulatory framework with a strong focus on Shariah compliance and competitiveness.

He said State Bank played a key role in issuance of Ijara Sukuk, which has paved the way for effective liquidity management of Islamic banks.

‘We have also ensured a tax neutral regime for Islamic banking transactions through amendments in tax laws,’ he said.

He said that the SBP had introduced a comprehensive Shariah compliance framework which includes inspection of Islamic banks coupled with joint audit of profit distribution to depositors by the external auditors and Shariah Adviser of the bank.

Each bank is also required to publish report of their Shariah Adviser on Islamic banking operations in annual accounts, he added.

Link: http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/business/09-sbp-chief-lauds-islamic-banks-performance--szh-04