Transcript HEALTH - University of the Punjab

RIPHAH UNIVERSITY, ISLAMABAD
Event
RIU International Conference: February 8-9, 2011, Islamabad
Topic for Presentation
The Challenges and Prospects of Islamic Banking in Pakistan
Date & Venue
February 09, 2011, NIBAF, Islamabad
Presentation by
Prof. Dr. Khawaja Amjad Saeed
Professor 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 ViceChancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute of Business
Administration (IBA), University of the Punjab, Lahore (1973-1996).
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PRESENTATION FRAME
A. Islamic Banking-Inretrospect in Pakistan
B. Growth of Islamic Banks in Pakistan
C. IBIs Deposits & Financing
D. IBIs Investments
E. Selected Performance Indicators: IBIs & Banking
Industry of Pakistan
F. Future Prospects
2
A: ISLAMIC BANKING - INRETROSPECT IN
PAKISTAN
1. Vision and Mission of Islamic Banking Department of SBP
2. Strategy for Islamic Banking in Pakistan
3. Historical Rundown
3
A-1: Vision & Mission of Islamic Banking
Department of SBP
State Bank of Pakistan, in its role as central bank, has developed
the following vision and mission:
1. VISION
“To make Islamic Banking the banking 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”.
4
A-2: STRATEGY FOR ISLAMIC BANKING IN
PAKISTAN
THREE PRONGED STRATEGY
In Pakistan, SBP has developed the following three point strategies
relating to development of Islamic Banks:
1. Full fledged banks can be established in Pakistan.
2. Islamic Banks can set up their subsidiaries.
3. Stand-alone Islamic Banking branches can be opened by
conventional banks in Pakistan.
Therefore, flexibility exists in respect of starting and expanding
Islamic Banks in Pakistan.
5
A-3: HISTORICAL RUNDOWN (Continued)
1. Pakistan was created out of Islamic Ideology. Therefore Islamic
Banking gets support for its development.
2. Quaid-e-Azam Mohammad Ali Jinnah, father of the Nation,
while inaugurating SBP on July 01, 1948 had guided Research
Department of SBP to help develop Islamic Economic System
which is based on equality and brotherhood.
3. Constitution of Pakistan
Article 38 (f) of the 1973 Constitution of Pakistan is quoted
below:
“The state shall eliminate riba as early as possible”.
6
A-3: HISTORICAL RUNDOWN (Concluded)
4. 1970s to 21st Century
a.
b.
c.
d.
1970s: efforts, in their initial stages, started to eliminate riba.
1980s: Bold and comprehensive initiatives were under-taken. Pakistan
joined the race of three countries in the world for interest free
banking. Several existing laws were reviewed. New financial
instruments were introduced, Twelve Non-Interest Based (NIB) modes
were released to replace riba based practices, Profit & Loss Sharing
concept was introduced.
1990s: Court battles were on. Instructions were issued by courts for a
time framework for implementation of replacing conventional banks
into Islamic Banks. However the system did not positively respond for
implementation.
2000s: In January 2002 Commission for Transformation of Financial
System was constituted in SBP. Task Force was set up to suggest ways
to eliminate interest from government financial transactions.
However, the end conclusion has been to continue parallel banking ie.
Conventional and Islamic Banks. This system is going on in Indonesia
and Malaysia also.
7
B: GROWTH OF ISLAMIC BANKS IN PAKISTAN
1. Some Growth of Islamic Banks: Important Indicators
2. Growth of Islamic Banks Branches
3. Islamic Banking Branches Network-Three Aspects
4. Islamic Banking Branches Network-Seven Aspects
5. Full Fledged Islamic Banks
6. Islamic Branches of Conventional Banks
7. City wise break-up of Islamic Banking Branches
8. Islamic Banks sub-branches
9. Maximum & minimum braches network of Islamic Banks
10. City wise Islamic Banking Branches network as on September
30, 2010.
8
B-1: GROWTH OF ISLAMIC BANKS:
Some Important Indicators
December 2003 to September 2010
Year
Total Assets
Share of IBIs %
Deposits
Total Rs.b
Net financing investment
(December)
Total Rs.b
Share of IBIs %
Total Rs.b
Share of IBIs %
2003
13
1
8
1
10
1
2004
44
2
30
1
30
1
2005
71
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
366
6
283
6
226
5
2010 (Sept)
424
6
338
7
233
5
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, P.4.
9
B-2: GROWTH OF ISLAMIC BANKS BRANCHES
December 2003 to September 2010
Year (December)
Number
Base Index
Number of Times
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 (Sept)
684
4,023
40
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, P.4.
10
B-3: ISLAMIC BANKING BRANCHES NETWORK
As on September 30, 2010
Number of
Particulars
Branches
%
A: Full Fledged Islamic Banks
437
64
B: Islamic Branches of Conventional Banks
197
29
C: Sub-Branches
50
07
684
100
Total
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 8, P.8.
11
B-4: ISLAMIC BANKING BRANCHES NETWORK
As on September 30, 2010
S. No.
Province
Number
%
1.
Punjab
306
44
2.
Sindh
231
34
3.
Khyber Pakhtoonkhwa
73
11
4.
Baluchistan
33
05
5.
Federal Capital
33
05
6.
Azad Kashmir
07*
01
7.
Northern Area
1*
-
684
100
*As on December 31, 2009
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 9, P.8.
12
B-5: FULL FLEDGED ISLAMIC BANKS
As on December 31, 2009
S. No.
Banks
Number of Branches
%
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
10
5.
Dubai Islamic Bank Pakistan Ltd
35
9
6.
Al Barka Islamic Bank
29
7
400
100
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.16.
13
B-6: ISLAMIC BRANCHES OF CONVENTIONAL BANKS
As on December 31, 2009
Banks
Number of Branches
S. No.
%
1.
Bank Alfalah Ltd
60
36
2.
Askari Bank Ltd
29
17
3.
The Bank of Khyber
18
10
4.
MCB Bank Ltd
11
6
5.
Standard Chartered Bank
11
6
129
75
6.
National Bank of Pakistan
8
5
7.
Bank Al-Habib Ltd
6
4
8.
Faysal Bank Ltd
6
4
9.
Soneri Bank Ltd
6
4
10.
United Bank Ltd
5
3
11.
Habib Metropoltian Ltd
4
2
12.
The Royal Bank of Scotland
3
2
13.
Habib Bank Ltd
1
1
39
25
168
100
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of Pakistan, December 2009, P.16.
14
B-7: CITY-WISE BREAK-UP OF ISLAMIC BANKING
BRANCHES
As on December 31, 2009
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
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, December 2009, P.18.
15
B-8: ISLAMIC BANKS SUB BRANCHES
As on December 31, 2009
S. No.
Banks
Number of Branches
%
1.
Bank Alfalah Ltd
35
44
2.
Bankislami Pakistan Ltd
32
40
67
84
3.
Dawood Islamic
8
10
4.
Askari Bank Ltd
2
2
5.
Emirates Global Bank Ltd
2
2
6.
Dubai Islamic Bank Ltd
1
1
7.
The Bank of Khyber
1
1
14
16
81
100
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, December 2009, P.16.
16
B-9: MAXIMUM & MINIMUM BRANCHES NET WORK
OF ISLAMIC BANKS
AS on December 31, 2009
S. No.
Province
Number
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
-
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, December 2009, P.18.
17
B-10: CITY WISE ISLAMIC BANKING BRANCHES NETOWRK
As on September 30, 2010
S. No.
City
Number
%
1.
Karachi
193
28
2.
Lahore
117
17
3.
Rawalpindi
33
5
4.
Peshawar
29
5
5.
Faisalabad
28
4
6.
Multan
24
3
7.
Quetta
22
3
446
65
238
35
684
100
8.
Others
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 9, P. 8.
18
C: IBIs DEPOSITS & FINANCING
1. Deposits
2. Sectoral Composition
3. Products
4. NPFs Time Series
5. Deputy Governor of SBP Suggested Investment Portfolio
for IBIs
19
C-1: IBIs Deposits
As on September 30, 2010
Particular
Rs. Billion
S. No.
%
A: CUSTOMERS
Fined Deposits
128
39
Saving Deposits
113
33
Currents Accounts-non-Remunerative
74
21
Others
03
01
318
94
20
06
338
100
Local Currency Deposits
320
95
Foreign Currency Deposits
18
05
338
100
B: FINANCIAL INSTITUTIONS
Remunerative
C: CURRENCY WISE BREAKING
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 7, P. 7.
20
C-2: IBIs FINANCING: SECTORAL COMPOSITION
September 30, 2010
S. No.
Sectors
IBIs%
Industry %
1.
Individuals
18.83
12.5
2.
Textile
17.91
16.8
3.
Chemical & Pharmaceuticals
9.91
4.3
4.
Energy: Production & Transmission
6.40
9.6
5.
Cement
3.63
2.7
6.
Sugar
2.30
1.6
58.98
46.5
41.02
53.5
100
100
7.
Other Sectors (Including 34.41% and 41.7%
for industry others)
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 5, P. 6.
21
C-3: IBIs FINANCING PRODUCTS (Total Rs. 162b)
September 30, 2010
S. No.
Products
%
1.
Murabaha
43.3
2.
Diminishing Musharaka
32.1
3.
Ijarah
13.6
89
4.
Others (Istisna: Salam, Musharaka, Mudarba)
11
100
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 4, P. 6.
22
C-4: IBIs NPFs TIME SERIES
Period
NPF
Net NPFs
Rs. b
Rs. b
September 2009
8.95
4.03
July 2010
10.65
4.39
September 2010
13.51
6.21
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 2, P. 5.
23
C-5: DEPUTY GOVERNOR OF SBP SUGGESTED
INVESTMENT PORTFOLIO MIX FOR IBIS
1. Large Unserved Agriculture Sector:
- GDP Share 22%
- IBIs have not yet entered in the market
2. SME Sector:
- Expand their outreach to smaller towns & rural/semi rural
areas
- Total SMEs
3.1 million
- Served by IBIs
2,300 clients
- Consequential Deficit: very low coverage
3. Housing Finance:
- Six million housing units deficit in the country
- untapped markets awaits IBIs to exploit
- Focus: low cost housing
Source: Extracted from: Deputy Governor of SBP, Mr. Yasin Anwar, Key note
Address on “Opportunities for IBIs” delivered in Al-Huda International
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Conference on Islamic Banking & Takaful, Lahore, Nov. 02, 2010
D: IBIs INVESTMENTS
1. Composition
2. Types
25
D-1: IBIs INVESTMENTS: COMPOSITION
As on September 30, 2010
Particulars
Rs. b
%
1. Federal Govt Securities
27.03
33
2. TFCs, Debentures, Bonds & PTCs
28.51
35
3. Fully Paid up Ordinary Shares
1.81
02
57.35
70
24.14
30
81.49
100
81.62
100
4. Others
Total
Shown in the table
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 6, P. 7.
26
D-2: IBIs INVESTMENTS TYPES
As on September 2010
Particulars
Rs. b
%
1. Available for Sale
66
83
2. Held to Maturity
12.93
17
3. Surplus deficit on revaluation
0.29
-
79.22
100
80.69
100
Total
Shown in the table
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September, 2010, Table 7, P. 6.
27
E: SELECTED PERFORMANCE INDICATORS IBIs &
BANKING INDUSTRY OF PAKISTAN
1. Capital
2. Assets Quality
3. Earnings & Profitability
28
E-1: SELECTED PERFORMANCE INDICATORS: IBIs
& BANKING INDUSTRY (Continued)
S. No.
1.
2.
3.
Particulars
September, 2010
CAPITAL
IBIs
Industry
(Capital to Total Assts)
12.4
9.9
NPLs to Financing
6.5
14.0
Net NPLs to Net Financing
3.0
4.5
Provisions to NPEs
55.0
71.1
Net NPFs to total Capital
13.4
21.6
Real Estate Financing to total Financing
8.6
2.1
Net Income to total Assets
0.7
1.0
ROE, after tax
5.4
9.9
Net Income Financing to Gross Income
21.0
24.4
ASSETS QUALITY
EARNINGS & PROFITABILITY
29
E-1: SELECTED PERFORMANCE INDICATORS: IBIs
& BANKING INDUSTRY (Concluded)
S. No.
Particulars
March, 2010
Trading & Exchange Gains/Losses to Gross Income
8.9
7.4
Operating Expenses to Gross Income
67.2
53.6
Personnel Expenses to Operating Expenses
29.1
35.5
Spread between Financing and Deposit Rates
6.9
6.8
Source: Extracted from: Islamic Banking Bulletin, Karachi: State Bank of
Pakistan, September 2010, Table 2, P. 5.
30
F: FUTURE PROSPECTS
1. Forecasts
2. Challenges
31
F-1: FORECASTS
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
4. Determined efforts needed by all of us to push forward the
process of Islamic Banking in Pakistan
32
F-2: CHALLENGES
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 in
this 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 with demonstrated results.
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