challenges. micheal ainley, ali. mashayekhi, robert hicks, arshadur rahman and ali ravalia. november 2007. predominantly hanafi school, bahrain, dubai and abu dhabi pursues maliki school, saudi arabia and qatar relies on hanbali school ). rather than pursue harmonized views, each faith developing its own applications adds to the cost of transaction, introduces doubts on viability of islamic finance given the split opinions, and confuses the public that basically relies on scholars endorsement of products and business. these differences along with different interpretations of shariah scholars at the boards or as advisors within the banks, if significant, further carry the risk of sharia arbitrage which carries complications for regulators. reaching consensus and shared / harmonized guidance among scholars of different beliefs and faiths and evolving more unified institutional mechanism for adoption of common shariah standards and ensuring proper enforcement through effective internal controls for their compliance would let the industry grow and compete on level playing field. flexible and simpler interpretation of the basic tenets at the level of scholars would enhance public acceptability. 12. finally, keeping these macro considerations aside, islamic banks being late starters do face a real challenge of competing with a well established conventional industry. furthermore, full - fledged islamic banks as per their licensing requirements have to confine themselves to islamic businesses and products, while conventional banks with islamic windows have inherent advantage as they can compete more aggressively offering both conventional and islamic businesses. different approaches to licensing are debated to have implications for competitiveness of industry whereby there is an argument put forward that in interest of fostering healthier competitions banks should be allowed to choose what they offer without imposition of licensing policy constraints. 3 to propel islamic industry allowing dedicated islamic banks is a well accepted course as long as regulators do not shield or provide preferential treatment to these institutions but creates a level playing field in regulatory and supervisory oversight. next stage of development 13. competitiveness of islamic finance in future would depend on how government and regulators perceive and nurture future development of islamic finance and address the issues highlighted above and develop institutional, regulatory and supervisory frameworks and their effective enforcement. in the next stage of islamic finance development, there is need for more substantive work on islamic finance in the areas of : ( i ) standardization of contracts and documentation which would reduce transaction costs and risks of litigation. ( ii ) development of dispute resolution mechanism for sharia compliance matters as regulators will not be in a position to resolve these

. the evolution or trajectory of microfinance has so far remained positive despite the fact that many challenges arose along the way which i will cover later. presently, nine mfbs are operating in pakistan. all these mfbs are privately owned and reflect diversity of ownership and approaches to microfinance banking. considering that the market has potential and the regulatory framework is supportive, the ownership in mfbs has flowed both from local and international investors including banks, development agencies, investment funds, mobile network operators, and large domestic mfis. one of the success stories in microfinance sector is the unique opportunity in pakistan to utilize alternative delivery channels due to the presence of a sound and pro - growth regulatory framework, dense population, and high demand for financial services. the motivation for developing alternative channels for service delivery is twofold : firstly, there is enormous scope for expanding outreach, especially to hard - to - reach rural areas. the emerging models relying on “ banking agents ” will greatly extend the distribution of financial services to the poor and marginalized segments. secondly, alternative delivery channels promise significant cost reduction to institutions. the traditional microfinance business is based on personal, one - on - one relationships. thus, personnel expenses often account for a bis central bankers ’ speeches significant portion of microfinance operating expenses. the use of banking agents will help to reduce the operating costs of the sector. the recent development in mobile phone banking is highly encouraging. the expansion in the retail network of microfinance has arisen overwhelmingly from agents and mobile phone channels. within a span of just two years, there are now almost 18, 000 branchless banking outlets surpassing the 10, 000 conventional bank branches. the combined daily transaction volume of the two prominent branchless banking models “ easypaisa ” and “ omni ” now averages over 175, 000, with an average size of rs. 3, 700. as per an independent world bank – cgap study, the small size of the transaction indicates enhanced access to finance by the poor and the marginalized unbanked people, an important milestone for financial inclusion. the early successes of mobile banking in pakistan are attributable to the collaborative efforts of a wide range of stakeholders, including the government, regulatory authorities, development agencies, nadra, telecom operators, financial institutions, and technology firms. sbp continues to work with all stakeholders, in order to support this nascent industry that is expected to be a key driver in expanding financial services to