ISLAMABAD: The multi-lateral lending agencies like the World Bank, Asian Development Bank and the IMF are keen to promote Islamic banking on long-term basis.
The Islamic Banking has become emerging market as the international financial institutions including International Monetary Fund and Asian Development Bank taking interest to do business in Islamic Banking sector in Pakistan.
Dr Humayun Dar, Director General of Cambridge Institute of Islamic Banking stated this in a literary discussion on the future of Islamic Banking.
Dr Dar talked to senior financial journalists in Islamabad at the National Press Club on Jan 17, 2022. Senior journalist Ahmed Mukhtar Naqshbandi coordinated this event.
According to the State Bank of Pakistan, the assets of the Islamic banking industry increased to Rs 4.269 trillion, while deposits reached Rs 3.389 trillion by the end of December 2020. The financing of the Islamic banking industry has also grown by 16 percent during 2020.
The Dar said that different international institutions want to enter in Islamic Banking in Pakistan. He added that the Asian Development Bank had also showed its interest to come in Islamic banking sector adding that ADB’s Islamabad Office called him some years ago for taking briefing on this issue.
The World Bank and The International Monetary Fund (IMF) are more interested to adopt Islamic Banking structure for dealing to Islamic countries which is like to emphasizing. Some year ago, The Country Director of Asian Development Bank in Pakistan has called and said that there is intelligence reports that government is going to pro Islamic banking and ADB had commitment of $10 billion during next 10 years and the Bank is ready to give financing on Islamic banking structure. Late on, the Government did not make request to the ADB for taking loan on Islamic Banking structure”, he said
On a query regarding expensive loan of Islamic Development Banking, he said that the source of the liquidity of the IDB is sukuks which is costly and expensive that’s why its loan is more expensive as compare to other international institutions.
On the issue of defaulting, Dar said that this is the area where, the Islamic Shariah Scholars should look into and give solutions to the Islamic banks. He said that Islamic Banks should imposed penalties on defaulting.
Regarding a query about the interest on loan, he said that it could not eliminate because no government wants to do so in Islamic countries added that these governments are influential by strong lobbies of banking which don’t wants to do so. He said that Banking is a sleep mode of business model which is so simple and profitable.
On a query, he said that there is no justification of imposing interest on loan due to devaluation of currency and inflation added that these are macro factors and borrower are not responsible of these factors. He said that it cant be impose the responsibility of the borrowers which they did not. He added that loan must be interest free in any situation. There is no harm and bared Islamic perspective if you don’t give loan to anybody.
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