News Column

INTERVIEW WITH MR SHAFQAAT AHMED, CEO AL BARAKA BANK (PAKISTAN) LIMITED

February 23, 2014

KHALIL AHMED

PAGE: TELL ME SOMETHING ABOUT YOURSELF AND AL BARAKA BANK, PLEASE:

SHAFQAAT AHMED: I have been associated with the banking industry for 40 years now from which over 20 years have been particularly dedicated to Islamic banking. My experience entails working locally as well as abroad. Association with Al Baraka goes back 20 years hence making Al Baraka the pioneers in Islamic banking in Pakistan.

Al Baraka is a subsidiary of Al Baraka Banking Group (ABG), a Bahrain Joint Stock Company, listed on Bahrain and NASDAQ Dubai stock exchanges. It is a leading International Islamic bank. The authorized capital of ABG is US$1.5 billion and asset base of US$19.5 billion and a total equity of US$1.9 billion. The group has banking units and representative offices in 15 countries spanning from Europe to MENA and Asia, with a network exceeding 460 branches.

Al Baraka Pakistan has a branch network of 110 branches in 58 cities and towns across the country. It is devoted to providing customers with a range of Shariah compliant products to suit their banking needs in this rapidly developing market. Al Baraka, strongly relies on its ability to be an effective and efficient market player through focus on superior customer service, development of Islamic alternatives to conventional financing facilities and strict adherence to Shariah rulings and principles. Al Baraka offers a wide array of Islamic products both on the liability as well as asset side besides ancillary services such as online branch banking, Debit Card, SMS Banking, InterBank Funds Transfer, E-Statements and Utility Bill Payments. Pakistan Credit Rating Agency (PACRA) has assigned Al Baraka Pakistan long-term and short-term rating of A, and A1 respectively.

PAGE: YOUR VIEWS ON ISLAMIC BANKING SECTOR GROWTH IN PAKISTAN:

SHAFQAAT AHMED: Islamic banking in Pakistan has witnessed significant growth in the last 10 years as it constitutes over 10% of the country’s banking system with an asset base now touching $1 trillion and a network of more than 1200 branches. With the same trend, the industry may cross double its present market share by 2020.

Despite challenges like limited range of products and services, availability of experienced HR, technology constraints, it has shown acceptable levels of growth as it has a huge market to tap. State Bank of Pakistan, Shariah and Academic Institutions are playing a significant role in the progress of the same.

A major contribution towards steady growth comes from the fact that Pakistan is actively engaging itself with Islamic Financial Services Board (IFSB), the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the International Islamic Financial Market (IIFM) and collaborations with other central banks. Our regulator has on a continuing basis played a vital role in raising awareness and building capacity of the industry.

PAGE: HOW WOULD YOU COMMENT ON THE COMPETITION WITH THE CONVENTIONAL BANKING SERVICES?

SHAFQAAT AHMED: Conventional banking has been in Pakistan since all times. The major challenge faced by Islamic banks is educating the masses and creating awareness on Islamic banking and helping them understand the difference between the two.

Size is an important variable to determine the scale and scope of efficiencies of a bank. Conventional banks have the advantage of their large network size. Islamic banks and financial institutions, however, being in the infancy stage, in comparison, are still growing to attain an optimum level. Secondly, needs of individuals and businesses vary on both demand as well as supply side. Additionally, varying risks are to be looked at as well. Since the needs and tastes vary from person to person, wide variety of products are to be developed to cater to all needs and tastes. However one of the challenges faced is that under the Islamic framework, besides catering to the above, strict compliance of Shariah rules and guidelines is a pre requisite.

Liquidity management is a global phenomenon faced by the Islamic banking industry. In Pakistan as well, Islamic banks have limited choice in terms of liquidity management i.e. participating in Sukuks, however, on the contrary conventional banking players have other options like PIBs, Investment bonds and treasury bills in addition to participating in Sukuks.

PAGE: GIVE YOUR VIEWS ON USE OF IT IN ISLAMIC BANKING SECTOR?

SHAFQAAT AHMED: The basics of software (methodology and understandings) available for products and services being offered to customer are more based on Conventional Banking than Islamic Banking. This includes all areas like financing, profit calculation and feature offerings as well. Islamic banks need to go an extra mile to develop or customize these software hence forth making it more time consuming and expensive. However, IT development and advancements is one of the core ingredients to write a success story.

PAGE: YOUR VIEWS ON GOVERNMENT SUPPORT FOR ISLAMIC BANKING SECTOR:

SHAFQAAT AHMED: The present government has taken major initiatives in promoting and strengthening Islamic banking in Pakistan. This is evident from the fact the State Bank of Pakistan has devised a high level steering committee, comprising of seasoned bankers and experts from the field, who are playing an important role in reviewing and recommending measures for growth of Islamic banking in Pakistan. Additionally, the government has also recently appointed a Deputy Governor at State Bank, to exclusively look after Islamic banking. With these various steps we are pretty optimistic that the issues and challenges faced by the players in the Islamic banking industry, will be addressed at an accelerated pace. Securities and Exchange Commission of Pakistan has also played a pivotal role in promoting and strengthening Islamic banking and finance in the country.

Needless to mention, SBP has maintained a strict regulatory regime to ensure that Islamic banking and finance continues to fulfill Shariah. The National Institute of Banking and Finance (NIBAF), a training wing of SBP, has also developed certificate courses in Islamic banking to educate the resources on Islamic banking and finance. SBP is very keen to promote Islamic banking sector; and has been developing policies, which favor growth of Islamic banking industry. They have also set up a separate department, which is involved in promotion and development of areas of Islamic banking such as product development, trainings etc. Not only this, regulator is also supporting the industry through the market analysis and research department.


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Source: Pakistan & Gulf Economist


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