- go by a certain given deadline. instead, we decided that we should provide a level playing field and afford opportunity for islamic banking to co - exist with conventional banking. we believed that the choice should be left to the individual consumer whether they would like to switch over to islamic banking or stick with their existing banks. the endeavor of the government and the central bank was to ensure that there was no discrimination, preference – overt or convert – policy biases in favour of one system or the other. if, over time, the majority of the consumers decide to opt for islamic banking, the whole system will naturally be transformed and the end point will be reached. in our view, it is not the responsibility of the government or the central bank to impose their will or dictate choices to the people. we have, therefore, opened up the banking system by allowing : ( a ) establishment of stand - alone islamic banks ; ( b ) setting up of subsidiaries of banks for islamic banking ; or ( c ) setting up of full - fledged islamic banking branches of the banks. the initial response has been overwhelming and hundreds of thousands of pakistanis who had never done any banking in their lives are now asking for more islamic banks or branches in their areas. in the very first year, islamic banking segments have captured 1. 6 % of the total assets of the banking system and the rate of growth is extremely fast. in the basis of the current trends, we project that the islamic banks will attain about 10 % of the market share in the next few years. the state bank of pakistan has developed a market - based regulatory framework including a high - powered shari ’ ah board to provide guidance on the shari ’ ah compliance aspects of the business and regulations. the institute of chartered accountants of pakistan ( icap ) has prepared accounting standards for islamic modes of finance which are being implemented. these standards are based on the aaoifi standards and are compatible with the international accounting standards. we have developed innovative products such as islamic export refinance scheme in consultation with the islamic banking industry for it to remain competitive with other banks. despite these positive developments which i have sketched above, i will be remiss in my duties if i do not put forth the enormous challenges in islamic finance and let me tell you there are many. ( a ) fund mobilization : the ways in which islamic banks can and do mobilize funds are all non - conventional and, in some ways, new to the regulators.

as to what is actually happening on these fronts. ladies and gentlemen, several of us – the governors of the central banks of islamic countries – worked closely with the international monetary fund ( imf ) for many years and ultimately formed the islamic financial services board ( ifsb ) whose headquarters is in kuala lumpur, malaysia. this body is working on the development of prudent and transparent standards and codes by introducing new or adapting existing international standards consistent with shari ’ ah principles. i am sure the secretary - general of the ifsb would be in a better position to inform you more about the activities of this body. however, i am satisfied that the work it has initiated through various working groups on risk management, capital adequacy, corporate governance, transparency and market discipline, as well as supervisory review process, is proceeding well and we expect the end products to be rigorous and of high quality. this institution, in our view, will economize on scarce expert resources, come up with a consensus view after rigorous debate and research and create uniformity and standardization of islamic products and services across countries. the second important body which i have also been associated with is the accounting and auditing organization for islamic financial institutions ( aaoifi ), which has so far issued over 50 accounting, auditing, governance and shari ’ ah standards for islamic financial institutions. islamic banking practices are becoming an integral part of the leading accountancy firms of the world – the big four – and many other countries and are, thus, being disseminated through their national affiliates and consultancy services. in the last few years, a number of other bodies dealing with different components of the islamic financial infrastructure have been formed and are beginning to take shape. they are, of course, at different stages of evolution but together they form the necessary complements. the islamic development bank ( idb ) must be given credit for taking the lead in establishing the international islamic financial market ( iifm ) which is working on the development of liquidity management instruments and markets for islamic financial institutions and more recently, the international islamic rating agency ( iira ) which will provide credit rating, shari ’ ah rating and corporate governance rating to islamic financial institutions. ladies and gentlemen, i now turn to the example of pakistan where we have vigorously introduced islamic banking in its true letter and spirit. we considered it totally imprudent to dislocate the entire financial system by directing substitution of the on - going banking by islamic banking in one