PROSPECTS OF ISLAMIC

BANKING AND FINANCE

INTERNATIONALLY

Presented by:
Mohammad Aslam
Head, Islamic Banking
Habib Bank Limited

Slide 1
AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS
 Presentation Flow
 Challenges
 Way Forward
 Global Perspective
 Islamic Finance and Dubai Debt Crisis
 Way Forward

Slide 2
 Challenges: Lack of Awareness
 Despite believing in riba free financing, public in
general is not clear about the concepts and products
offered by Islamic Banking
 There is lesser acceptance as it is generally considered
as “Same thing with different packing”
 There are myths in the market, like “Islamic Banking
is expensive for financing and gives less return on
deposits products”

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 Challenges: Liquidity Management
 There are limited Shariah Compliant Instruments
available to Islamic banks to manage their liquidity,
unlike its conventional counterpart, which has PIBs,
Treasury bills etc.
 Limited availability to access to lender- of- last resort
(LOLR) facilities by central banks. The lack of Shari’ah-
compatible LOLR facilities is associated to the prohibition
of interest and thus discount rate.
 The secondary market is not well developed for
investment instruments.
 Interbank market for Islamic banking institutions is not
well developed.

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 Challenges: Skilled HR
 There is a general scarcity of resources, who have
knowledge of both conventional banking and Islamic
banking
 Although , a number of institutions, imparting Islamic
banking training, have cropped up but there is still
demand/supply gap of quality resource.
 Institutions like Al-Huda, Publicitas, Islamic
Universities are playing a key role in providing
Islamic banking industry with trained resources.
Islamic Banks should support these institutes.

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 Challenges: Limited Outreach
 The branch network of Islamic banks and Islamic
divisions has limited reach, particularly in the rural
areas.
 Micro finance and Agri-finance markets are still
untapped.
 Limited Islamic banking products as compared to
Conventional Banking

Slide 6
 Global Perspective
 Currently more than 1100 institutions are offering
Islamic Financial Services across the Globe
 Assets of the top 500 banks worldwide expanded
28.6% to $822B at the end of 2009 compared to
$639B in 2008.
 Standard & Poor’s estimates the Shariah Compliant
assets currently total about 1 trillion worldwide
 Dubai, Singapore , London and Kuala Lumpur are
trying to become centers of global Islamic finance.
 The above facts reflects that Islamic finance has
become a recognized and a specific segment of
finance on its own with bright growth prospects.

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 Global Perspective
 According to CIMB Group Holdings, Islamic finance is
the fastest-growing segment of the global financial
system and sales of Islamic bonds may rise by 24
percent to $25 billion in 2010.[1
 The Vatican has put forward the idea that "the
principles of Islamic finance may represent a possible
cure for ailing markets.”

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 Dubai Debt Crisis
Most of the Islamic banking industry was not impacted
by the global financial crisis , but the rescheduling of
Dubai World’s Sukuk led to speculation about the
viability of Islamic banking solutions .

According to Reuters:

“Dubai's debt crisis has stifled sukuk issuance and

unfairly put a damper on the Islamic finance industry,
experts said, noting but an unstable credit environment
and poor due diligence was to blame for the debacle”.

Hence, Islamic finance still provides better financial

solutions as compared to conventional finance.
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 Way Forward
 Although, the number and operations of Islamic banks are fast expanding
(667 branches in June 2010), this segment of the market is still small relative
to the appetite for Islamic finance.
 In this connection, large banks like HBL are aggressively entering the market
to tap the potential.
 SBP is supporting the industry but SBP & Islamic financial institutions need to
work closely on multiple fronts to promote the industry.
 Islamic Banking institution need to focus more on Musharaka and Mudaraba
based product to further support the growth of Pakistan’s Economy.

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 THANK YOU

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