yaseen anwar : islamic banking potential of pakistan speech by mr yaseen anwar, governor of the state bank of pakistan, at the round table conference on “ islamic banking potential of pakistan ”, karachi, 15 january 2014. * * * mr. president, honourable governor sindh, honorable finance minister, distinguished guests, ladies and gentlemen, assalamualaikum, i am indeed privileged to be here today for addressing this prestigious gathering comprising all major stakeholders of the islamic banking industry in pakistan. the presence of foreign experts have today brings global experience to this roundtable conference and thus will further enrich the knowledge sharing experience. my appreciation to the organizers for holding this event to explore the real potential of islamic banking in pakistan, which i believe will give further boost to our efforts and optimism for growth and development of the industry. islamic finance during the last four decades has witnessed considerable progress at the global front. besides the traditional islamic finance markets of the middle east, financial centers across various western countries are also accepting and recognizing the viability and utility of this alternate financial system. in particular the relative resilience of islamic financial institutions during the recent financial crisis due to its asset backed nature and being devoid of speculation and uncertainty, has significantly improved its credibility as a more prudent and stable system. the scope and range of islamic finance products has also widened considerably over the years and islamic financial institutions are presently catering to most of the financial services needs of various sectors of the economy. there are dedicated regulatory, legal and academic institutions at the international level working and providing support for maintaining the high pace growth of the islamic finance industry. pakistan, with more than 95 percent muslim population, and a constitutional obligation of ensuring a riba free economic system, has had a favorable response to islamic finance. pakistan is amongst the pioneers of islamic finance as we started planning for nurturing the shariah compliant financial system way back in 1970s, and made a bold attempt in 1980s to bring the whole banking and financial system in conformity with shariah principles. the pioneering work of 1980s particularly on the legal and regulatory front has been a source of guidance and inspiration for many countries that initiated islamic finance in the 1980s and 90s. the attempt to transform the whole system however, met with limited success largely due to slippages at the implementation and execution stage. this lead us to re - launch islamic banking in 2001 in parallel to conventional banking thus allowing both islamic and conventional banks to co - exist and enabling the consumers to do

15 percent of the banking system. pakistan has been an active member of leading global international islamic finance institutions like the islamic financial services board ( ifsb ), the accounting and auditing organization for islamic financial institutions ( aaoifi ), and the international islamic financial market ( iifm ) that are all playing a key role in developing prudential and shariah standards for the industry. being part of the global efforts for the development of global standards for the industry has certainly helped us in improving our presence on the global islamic finance map and adopting the prudential and shariah standards in pakistan. i would also like to mention here that sbp is also a key member of the recently constituted steering committee for the promotion of islamic banking by the government which is mandated to devise a comprehensive policy framework for the islamic financial system, suggest practical steps needed to be taken for implementing shariah - based financial system, and propose solutions for the islamic secondary market / money market for liquidity management. these initiatives on part of the government sends a clear signal that the present government views islamic banking and finance as an integral part of the overall financial system. we at sbp share the same view and believe that steps like these can go a long way in further increasing the scope of the industry in the country. innovation requires research, hence it is imperative that the industry players give utmost importance to research in their organizations. i am pleased to inform this esteemed audience that sbp has a dedicated team of researchers focusing on key areas relevant to the industry. we have recently conducted an extensive survey based study of 10, 000 household across the country to assess the demand for islamic banking and its attributes. the results of the survey will be shared with the industry soon and are highly encouraging as there is a huge untapped demand for islamic banking in the country ; and an even faster pace expansion of the industry would be needed to fill the demand and supply gap in the medium to long term. lastly! i would like to reiterate the full support and ownership of sbp in developing and nurturing a sound and stable financial system that meets the shariah principles in letter and spirit. we will work with the industry and other stakeholders to ensure further strengthening of risk management practices, and an effective macro prudential framework and transparency in financial transactions and exposures. the state bank of pakistan remains committed to finding appropriate solutions to these challenges. i have no doubt that the support and cooperation of all stakeholders exhibited here today