over rs. 900 billion and a network of more than 1, 100 branches. given the interest of all stakeholders and a relatively high level of financial exclusion in the country, we believe this expansionary trend is likely to continue and the industry is well set to double its market share by 2020. this success could not have been possible without the leading role of the central bank in setting the direction of the industry and providing unusual support for its promotion and development. promoting islamic finance as a viable and competitive component of the financial system through an enabling legal, regulatory and supervisory environment has remained an important component of sbp ’ s strategic goals. considering the evolutionary stage of the industry, we are continuously engaged in refining and improving the legal and regulatory framework to ensure : a ) its responsiveness to the evolving industry dynamics and b ) its effectiveness in identifying, measuring and mitigating the risks associated with islamic finance. in the recently concluded fiscal year we issued detailed instructions for profit & loss distribution and pool management to bring standardization, improve transparency and safeguard interests of investment account holders ( the savings depositors ). the instructions developed through rigorous consultations with the industry have been well received both domestically and globally. bis central bankers ’ speeches similarly to further improve the shariah compliance environment in ibis, our islamic banking department has completed industry consultations on the draft shariah governance framework and will soon be issuing the same. the framework will be another key milestone achieved, which will institutionalize the shariah compliance function and crystallize the shariah compliance related roles and responsibilities of all key organs of ibis including bods, executive management and shariah boards moreover, to encourage standardization and shariah harmonization, sbp over time has issued permissible islamic modes of finance model islamic financing agreements besides adapting aaoifi shariah standards for the pakistani market in a gradual manner. the continuation of growth momentum achieved during last the 4 – 5 years is contingent on making an objective assessment of the successes, failures and future challenges and developing consensus strategies and action plans to build on the successes and address the challenges. we have accordingly developed the five year strategic plan for islamic banking industry again through a rigorous and meaningful consultation with all key stakeholders. the plan to be issued soon lays down the future road map of the industry, highlight areas of improvement in legal, regulatory and taxation environments, emphasize diversification of products and markets covering non - traditional but strategically important sectors of agriculture and smes and increasing the islamic banking market

to build mfi systems and staff capacity. it can take some years for an mfi to reach the scale and efficiency needed to cover its costs from interest income. during this period donors can support to build the capital base of efficient mfis, enabling them to grow more quickly, increase their leverage, and serve larger numbers of clients on a sustainable basis. subsidies may well be used to correct market failures ; such as, to increase efficiency, transparency in financial reporting, and supporting industry infrastructure. 13. within south asia, pakistan is actively pursuing a broad based financial inclusion strategy in conformity with the best practices through a public - private partnership model. in order to speed - up the process of financial inclusion, the state bank of pakistan has developed an ambitious plan to scale up outreach of microfinance services to 3. 0 million users by the end of 2010, scale number of small agriculture borrowers to 2. 0 million and sme borrowers 300, 000 by 2010. the dfid, and other donors, will be providing substantial financial and technical support to pakistan ’ s financial inclusion programs. 14. based on experience and research, critical conditions for financial sustainability of financial inclusion programs are : ( i ) economies of scale : given direct relationship between profitability and scale of operations, larger banks / mfis are able to evolve business models and growth strategies to reach out to poor clients on a sustainable basis. such institutions have inherent ability to spread fixed cost over more transactions, promote multiple sales points, adopt innovation and technology which together offer ease and efficiency in service delivery. these factors enhance ability of firms to expand and compete to stay in power. ( ii ) proper funding mechanism : sustainability requires that mfis largely rely on deposit mobilization to finance their businesses. in initial stages of development however mfis end up developing alliances with the commercial financial institutions. these arrangements offer opportunities for foreign and / or local currency funds. setting aside moral hazard of generating protracted dependency, foreign exchange risks in absence of the natural hedge raises the end pricing to clients that inadvertently results in dampening demand or magnifies probability of defaults. it is usually easier for mfis to successfully borrow from a bank than to sell a bond which involves disclosure of information to produce adequate confidence in the borrower. however, profitable mfi have successfully issued bonds sparking interest in financial markets such as compartamos bond issue in mexico. alternatively, a number of instruments and relationships can enhance the ability of m