The ministry of finance has set up a committee to explore areas to promote Islamic banking in the world’s second most populous Muslim nation including the study of converting conventional banks into sharia-compliant ones.
Regulators in Pakistan are rolling out a range of initiatives, such as a media awareness campaign, to expand Islamic banks’ share of the total banking sector to 15 percent by 2017.
Islamic banks held 903 billion rupees ($8.4 billion) or 9 percent of total banking assets as of June this year, posting 27 percent year-on-year growth, central bank data showed.
The committee will submit recommendations on 10 areas by December 2014, including legal obstacles to converting banks into Islamic ones and changes required to remove those obstacles, a statement from the ministry of finance said.
Other tasks for the committee, which will be supported by the country’s central bank, include formulating a comprehensive policy framework and timeframes for the industry’s progression.
Proposals involve Islamic money markets, secondary market liquidity and maximising equity-based financing rather than debt-based financing would also be explored.
Islamic finance follows religious principles such as a ban on interest and gambling, making interest-based transactions a major problem for Islamic banks, even those operating in the core industry hubs in the Middle East and Southeast Asia.
The committee comprises scholars and regulators as well as bankers such as Afaq Khan, chief executive of Standard Chartered, Saadiq Muneer Kamal, chairman of the National Bank of Pakistan and Atif Bajwa, chief executive of Bank Alfalah.