Instructions are issued to banks by the State Bank of Pakistan to expand the scope of Islamic banking operations to 25 percent assets and deposits.
On Wednesday, the country’s central bank issued directives to the country’s banking industry to expand the scope of shariah-compliant banking to 25 percent assets and deposits by 2023. According to State Bank of Pakistan, Islamic Banking Windows’s operations should be expanded as IB has shown its significant potential in improving the share and outreach of shariah-compliant financial services, this is why revised instruction to expand the scope has been issued.
State Bank aims to make Islamic banking full-fledged banking branch
Moreover, all types of financing products can easily be offered by Islamic Banking Windows that includes small medium or corporate enterprises, consumers, housing, and agriculture. For this concern, a condition would be imposed that within 3 years the IBW branch will be transformed into Islamic banking fully.
SBP further said, “It is expected that this new policy measure will contribute towards achieving the targets set under the National Financial Inclusion Strategy for Islamic banking, which envisages attaining a share of 25pc in total assets and deposits of the banking industry and 30pc share in the total branch network of the industry by the end of 2023,”
Islamic Banking Windows can be opened by conventional banks after getting permission from the SBP but now there would be no permission to offer financing products.
The State Bank of Pakistan also said that currently, 1400 Islamic Banking Windows of 11 banks are operational in Pakistan and so their potential to enhance access to finance would be increased. Also, it will be a contribution to increase financial enclosure to the majority of the population via provincial shariah-compliant financing facilities.
SBP further said, “These revised instructions will supersede all previous instructions issued on IBWs by the SBP from time to time,”