Pakistan

National Savings plans launching of first Islamic product next year

#Pakistan's National Savings is expected to launch its first Islamic savings product by the start of 2018. According to Zafar Masud, director general of National Savings, the proposed product would begin with one year maturity and allow investors to earn monthly profit. The plan is to issue this product from the National Savings centres. Investors can invest a minimum of Rs10,000 with no maximum investment limit. National Savings manages a portfolio which is around 30% of Pakistan’s total banking deposits and serves more than seven million accounts. Experts see prospects of higher demand for Islamic finance to tap domestic savings. It is expected to increase competition among conventional and Islamic lenders to offer best returns to the savers.

#Pakistan eyes $3bn debt through #sukuk, Eurobonds

Pakistan has allowed immediate borrowing of up to $3bn from international debt markets by floating three sovereign bonds. The country is going to float the bonds in the largest transaction to take pressure off the central bank’s foreign exchange reserves that are depleting at a rapid pace. Earlier, the government borrowed $2bn in 2014 through similar capital market transactions. A consortium of banks have initially indicated that five-year sukuk, ten-year Eurobond and another 30-year Eurobond with combined proceeds of around $2bn to $3bn can be floated. The cabinet waived a dozen income taxes to make the float attractive for foreign investors. Road shows are expected to be held in the UK, US, Dubai, Singapore and Hong Kong. Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank and Deutsche Bank were appointed for the Eurobond issue. For the proposed Sukuk, the Fourth Pakistan International Sukuk Company is being incorporated by the Finance Division.

#Pakistan plans to raise $1b from #Sukuk offering

Pakistan has picked arrangers for a potential $2bn debt sale planned for later this year. The sale would come as Pakistan’s finances are starting to show strain. The nation’s foreign-exchange reserves have fallen 15% to $19.8b this year as its traditional exports dwindle and imports rise. The World Bank estimates that $17b of external financing is needed in the next financial year for Pakistan to bridge its rising debt payments and current account deficit. The deficit is expected to widen to 5.7% of gross domestic product, from a deficit of 4.4% in 2016. The country is planning to raise $1b from a Sukuk offering, and has mandated Citigroup, Standard Chartered, Deutsche Bank, Dubai Islamic Bank and Noor Bank to manage the sale. Citigroup, Standard Chartered, Deutsche Bank and Industrial & Commercial Bank of China were chosen for a potential conventional bond offering of an equal amount.

Dubai Islamic Bank #Pakistan, Shahnawaz Ltd sign strategic alliance

Dubai Islamic Bank (DIB) and Shahnawaz have entered into a strategic alliance agreement. Shahnawaz is the authorized general distributor of Mercedes-Benz in Pakistan. This initiative will help in establishing Dubai Islamic Bank Pakistan as the preferred financial services partner for Mercedes-Benz in the country. The signing ceremony was held in Karachi in the presence of M Naeem, CEO of Shahnawaz, Naseem Shaikh, General Manager of Shahnawaz and Junaid Ahmed, CEO of Dubai Islamic Bank Pakistan. Junaid Ahmed said this alliance enables the bank's high net worth clientele to achieve their dream of driving their own state-of-the-art Mercedes.

#Pakistan's Islamic banks show its conventional peers how it's done

While still quite new in Pakistan, Islamic banking is moving ahead in all segments of their operations. The network of Islamic banking institutions (IBIs) has expanded. Now it consists of 21 IBIs, five full-fledged Islamic banks and 16 conventional banks having stand-alone Islamic banking branches. IBIs have expanded their branch network to 2,320 branches. The number of Islamic banking windows, operated by conventional banks, is now at 1,255. Islamic banks' assets in overall banking assets were 11.6% at the end of June. Their asset base increased by Rs150 billion, or 8%, during the quarter to stand at Rs2,035 billion. The market share of IBIs in the overall banking industry was recorded at 11.6% and deposits 13.7% at end-June 2017.

NAB to investigate #merger of KASB bank into BankIslami

#Pakistan's National Accountability Bureau (NAB) initiated an inquiry into the alleged misuse of authority by SBP officials at the amalgamation of KASB Bank into BankIslami. According to the State Bank of Pakistan (SBP), a smear campaign was run in the media against them. SBP added that the onesided views presented in the media led to misjudgment about the authority of SBP as a guardian of the financial sector. All stakeholders of the defunct KASB Bank were well aware of the poor financial conditions of the bank. The State Bank gave ample time to the sponsors of KASB Bank to inject further capital into the bank. Besides capital shortfall, the bank and its sponsors engaged in fraudulent practices and were siphoning off more than Rs 3 billion from the bank. SBP stated that none of its officials misused authority nor were involved in any kind of corrupt practices.

SECP introduces draft of Sharia Advisors #Regulations 2017

To enhance the credibility of Islamic financial services sector, the Securities and Exchange Commission of Pakistan (SECP) introduced a draft of Sharia Advisors Regulations 2017. The new regulations are expected to professionalise Shariah advisory services. Companies would only be able to engage the advisors who would be on the SECP’s panel of Shariah advisors. To join this panel, advisors need to meet proper criteria and abide by a code of conduct that emphasises independence and objectivity. The draft of Shariah Advisors Regulations 2017 is available on the SECP’s website and is now open to the public for consultation.

Silk Bank to grow in Islamic banking

#Pakistan's Silk Bank plans to expand its Islamic banking business amid growing demand for Shariah-compliant financial products in the country. The State Bank of Pakistan has given approval to the bank for opening of 20 Islamic and 15 conventional branches this year. Silk Bank CEO Shaukat Tarin said the bank was going to reduce the size of corporate banking, but increase consumer and SME segments. The bank’s consumer banking portfolio continued to grow, while its non-performing loans fell by Rs10 billion in January-June 2017. The bank also made its commitment to revive the mortgage business in the current low interest rate environment. Shuja Alvi, head of investment at Silk Bank, said the bank continued to make heavy investments. Since acquisition, the sponsors have invested Rs430 billion in the bank through multiple funding.

Deposits of Islamic banks grow 10pc

The State Bank of #Pakistan (SBP) issued the Islamic Banking Bulletin for April-June. It reveals that deposits of the Islamic banking industry increased by Rs156 billion or 10% quarter-on-quarter to Rs1,720bn. Deposits of the overall banking industry grew 6.5% over the same period. The share of Islamic banks’ deposits in overall banking industry’s deposits increased to 13.7% at the end of June from 13.2% a quarter ago. This growth helped Islamic banks improve their asset base. The share of Islamic banks’ assets in overall banking assets was 11.6pc at the end of June. Investments also improved thanks to sukuk worth Rs71bn that the government issued in June. Net investments of the Islamic banking industry increased Rs48bn or 9.9% in April-June to Rs537bn. SME financing increased to 3.2% and the share of agricultural financing stood at 0.4% at the end of June.

Al Baraka Bank issues Rs1,500m tier-II #Sukuk

Al Baraka Bank Pakistan Limited (ABPL) has announced the successful issuance of its A rated privately placed tier-II Modaraba Sukuk. The Rs 1,500 million Sukuk issue was subscribed by a diversified investor base, in total, a number of 12 institutional investors participated in the issue. The Sukuk has a 7 years tenor, is redeemable at maturity and has a Call Option which is exercisable after 5 years with SBP’s consent. ABPL’s first tier II Sukuk issue of Rs 2,000 million was launched in 2014, as the first of its kind transaction in Pakistan. Speaking on the occasion, Shafqaat Ahmed, CEO of Al Baraka Bank Pakistan, expressed his thanks to all the investors for showing their continued confidence in the bank. He also appreciated the support and guidance extended by the State Bank of Pakistan.

Islamic Development Bank pledges continuous support to Polio Programme

Pakistan's Polio Eradication Senator Ayesha Raza Farooq said the country was highly indebted to the Islamic Development Bank (IDB) for its support and acknowledges the critical support of the bank for Polio eradication. The senator was talking to an IDB delegation visiting the National Emergency Operation Centre (NEOC). The IDB delegation was led by Dr Sadik Mohammad Teyeb, senior health specialist of the bank from Jeddah and Inamullah Khan, Country Representative of the Bank in Pakistan. The current epidemiology in the country is quite promising with only 3 Polio cases reported in 2017 compared to 14 reported by 7th August in 2016. The most significant progress has been made in the core reservoirs of Karachi and Khyber-Peshawar which have not reported any Polio case since January and February 2016.

#Investors #prefer #Shariah-compliant pension #products

The private pension fund industry grew by over 32% during 2016-2017, and the total assets of the industry crossed Rs25 billion. This growth of the industry has primarily resulted from an increase in participation by general investors and better performance of the stock market.
Thereby investors preferred Shariah-compliant pension products over conventional products. Out of Rs25 billion assets of pension funds, over Rs16 rupees comprise of Shariah-compliant securities.
In 2007 private pension funds were introduced. Currently there are 19 pension funds operating in the market, out of which 10 are Shariah compliant and 9 are conventional. These funds are managed by 10 fund managers. The pension funds provide participants investment options in terms of securities and commodities.
Participants can choose retirement age between 60 to 70 years. On retirement, they can withdraw up to 50% of the accumulated balance in lump sum and the remaining 50% in installments, as pension.

#Pakistan sets rules for banks wanting to be fully sharia compliant

Pakistan's central bank has issued guidelines for banks that want to be fully-fledged sharia compliant, setting a three-year time frame for applicants to complete the process. The rules aim to accelerate the growth of Islamic banking in the country. Eligible applicants must have existing Islamic finance operations and the conversion process must start within six months of approval. After the conversion of conventional branches, the applicant can then apply for a fully-fledged Islamic banking license. Such conversions are rare in Islamic finance but are seen as a way to increase the scale of the bank and widen its reach into under-served rural areas. Islamic banking in Pakistan currently includes five fully-fledged Islamic banks and 16 conventional banks offering Islamic financial products. As of March, they held assets worth 1.9 trillion rupees ($17.9 billion), a 16% increase from a year earlier and 11.7% of total banking assets. However, their capitalization and profitability ratios remain below the industry average.

#Kuwait's Noor to Weigh Stake Sale of #Pakistan's Meezan Bank

#Kuwait’s Noor Financial Investment is considering the sale of its 49% stake in Pakistan’s largest Islamic lender Meezan Bank. The stake has a market value of about $396 million at the current market price, according to data compiled by Bloomberg. Noor Financial hired advisers to assess opportunities, but it has not tasked the consultants with either increasing or decreasing its stake in Meezan Bank. Shares in Noor Financial gained 5.9% by 12:30 p.m. in Safat, Kuwait, the highest since April 16. Meezan advanced 3.6% in Karachi trading to a record high.

Burj Bank cement strong reputation

With a strong background in Middle Eastern banking, Burj Bank has been building a solid reputation based on integrity. Burj Bank was founded in 2007 under the name of Dawood Islamic Bank as a central pillar of Pakistan’s Islamic Banking landscape. In 2011 the bank was renamed and launched as 'Burj Bank Limited', following a massive capital injection by some Middle Eastern investors of the bank. At present, almost 85% of Burj Bank’s shareholding stems from the Middle East, with majority ownership belonging to the Islamic Corporation for Development of the Private Sector (ICD). In 2012 Burj Bank grew its deposit base by 77% and the financing portfolio also reflected a growth of 67%. The branches grew from 50 to 75, reflecting a percentage distribution network growth of 50%. The bank has entered into diverse new lines of business including SME (small- and medium-sized enterprise) banking, investment banking, agricultural financing, cash management and home Musharaka.

SECP easing #Sukuk rules to facilitate Islamic finance

The Securities and Exchange Commission of #Pakistan (SECP) announced that it was relaxing regulations for Sukuk issuance in order to develop the Shariah-compliant market. The regulator said the SECP was amending the 2015 Issue of Sukuk Regulations to facilitate the issuers, reduce the cost of issue and ease the regulatory burden. The SECP has invited public opinion on the proposed amendments before their finalisation. The commission has also advised the PSX to come up with proposals for reducing the cost of market-maker for Sukuk issuance, rationalising the minimum size of public offer portion to reduce the cost of issue and organising a seminar with potential issuers to widen awareness. According to the SECP, the Sukuk market has been performing below potential in Pakistan. While the demand is substantial, supply remains short.

#Pakistan updates guidance for Islamic banks' external #audits

Pakistan's central bank has updated guidance on sharia governance for Islamic finance institutions. The goal is to expand the scope of external audits to help mitigate conflicts of interest and increase transparency. Those religious scholars who are members of an Islamic bank's sharia board are now barred from serving in any external audit firm. From now on, external sharia audits will have to cover pool-management practices and technology systems. This includes the way Islamic banks calculate distribution of profit and loss to depositors, the tracking of assets, and the allocation of income and expenses. The move is designed to separate the verification of profit and loss distribution between the banks and the external auditors, in contrast to the joint verification that was allowed under earlier guidance.

BankIslami signs strategic alliance with CompareOn

BankIslami Pakistan and fintech startup CompareOn Pakistan have signed a strategic alliance that will further enhance BankIslami’s reach. CompareOn Pakistan provides the online comparison platform Karlocompare.com.pk, which delivers product information and enables customers to apply without the need of visiting or calling BankIslami branches. The agreement was signed by Sumair Farooqui, CEO of CompareOn Pakistan and Yasser Abbas, Head of Islami Auto Finance. Speaking on the occasion, Sumair Farooqui said CompareOn Pakistan intends to serve the growing customer base of Auto Financing Industry and contribute to enhancing awareness around BankIslami’s products.

Islamic finance

The International Monetary Fund (IMF) has released its guidelines for the Islamic finance sector. The guidelines noted the need to develop a policy framework in the countries where Islamic banking has become systemically important. While accounting for a small share of global financial assets, Islamic banking has established a presence in more than 60 countries and has become systemically important in 14 jurisdictions.
Although Pakistan finished the IMF loan programme last year, there are still numerous reforms that need to be undertaken. In recent years, the State Bank of Pakistan (SBP) has made efforts for the promotion of Islamic banking, but no real effort has been made by the private sector and the government. The growth of Islamic banking poses new challenges and risks for regulatory and supervisory authorities. The IMF has proposed support for developing and providing policy advice on Islamic banking-related issues in the context of fund surveillance, programme design, and capacity development activities.

#Pakistan's National Savings Scheme may offer #Islamic #banking services

Pakistan's government-operated National Savings Scheme (NSS) is evaluating whether to offer Islamic banking services. This plan will help depositors put their cash into Islamic Shariah-compliant Ijara sukuk. As soon as that happens, millions of new accounts are expected to be opened, bringing a huge population of medium and small savers into the banking stream. Millions of others who are currently operating accounts in conventional banks may also be snatched away by the NSS. Investments in all types of the NSS go directly to the government of Pakistan, which uses this cash inflow to fill the budgetary gap and to fund its development projects. NSS deposits by people totalled Rs233 billion in 2015-16 and Rs337 billion in 2014-15. In the event of introduction of Ijara sukuk, some of these deposits are likely to be switched to this Islamic mode.

Syndicate content