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Citibank is one of many banks negotiating with the Pakistani government to get an Islamic banking license
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KARACHI,
January 31 (IslamOnline.net & News Agencies) – Responding to a
growing appetite among local residents, foreign-based banks are
showing increasing interest to introduce banking products in Pakistan
modeled on the Islamic principles.
"Almost
all the strong and major banks are negotiating with us," Pervez
Said, director of the Islamic banking department at Pakistan's state
bank, told Agence France Presse (AFP) Sunday, January 30.
Said
was referring to ongoing negotiations between the Pakistani government
and major banks such as Citibank, ABN Amro and seven other banks to
get Islamic banking licenses.
Pakistan
has been witnessing a growing inclination for Islamic banking over the
past 18 months.
Some
23 branches of two fully-fledged Islamic banks, one local and one
foreign-based, have been recently opened in the country. Also, nine
conventional banks, including Standard Chartered and AG Zurich, have
25 branches across Pakistan.
"Islamic
banking is here to stay. They are not coming out of some religious
fervor but because there is a strong consumer push," Said added.
"A
reasonable expectation is that by 2010 about 20 percent of
conventional banking might come into the ambit of Islamic
banking," Said explained.
Interest
is banned under the Islamic banking system, as the religion forbids
usury. "Murabaha" is a classic practice of Islamic banking,
under which a borrower has to pay an extra amount agreed in advance.
This
amount is regarded as a "reward" for the risk taken by the
bank. Islamic banks also typically take part in joint investments,
sharing in the profits or the losses of a business venture.
Flourish
Being
aware of the increasing desire among local citizens in Pakistan, many
banks have shown interest in introducing products modeled after
Islamic laws, according to AFP.
"There
is tremendous market potential for Islamic banking in Pakistan, as
surveys show there is a high commitment level that will push demand
higher," said Hasan Aziz Bilgrami, chief executive of the Bank
Islami Pakistan (Islamic Bank of Pakistan).
Bank
Islami is getting ready to launch more than half a dozen branches next
month.
It
will be the third full-on Islamic bank in the Muslim country, with 25
percent equity from Britain's DCD Group, a property and real estate
business which also has core shares in the Islamic Bank of Britain, he
said.
"We
expect to tap the potential of Pakistan's 90 percent-plus Muslim
population, who have the highest commitment to their faith,"
Bilgrami said.
The
growing banks' interest to introduce Islamic banking in the country
was welcomed by local citizens.
"I
never went for conventional banking as it is based on interest, which
is prohibited in Islam and amounts to waging war against Allah,"
Moeenul Haque, a Pakistani dealer in imitation gold and silver
ornaments, told AFP.
"Now
I have my bank account in an Islamic bank and it satisfies my
faith."
Islamic
Bonds
Assets
of conventional banks in Pakistan hit 2.3 trillion rupees or about 40
billion dollars till 2004, according to government statistics.
In
an attempt to activate the capital and financial market in the
country, Pakistan launched road-shows for its first Islamic bonds,
named Sukuk, according to AFP.
"There
has been tremendous success during the road-shows in the Middle East,
and HSBC and Citibank are said to have underwritten Islamic bonds
worth 600 million dollars," said Fazal Ahmed, chief financial
officer of the Islamic Investment Bank.
He added that Pakistan followed Malaysia and
Bahrain -- considered the role models of Islamic banking -- while it
formulated its own regulations.
He
added that Pakistan followed Malaysia and Bahrain -- considered the role
models of Islamic banking -- while it formulated its own regulations.
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