and semi urban areas signifies an attractive opportunity for islamic banks. you must be knowing that our survey based research study on islamic banking “ knowledge attitude and practices of islamic banking in pakistan ” identified the potential greenfield growth for islamic banking in the country. this implies that the true potential of islamic banking industry of the country lies in underserved areas / sectors, particularly balochistan, interior sindh, south punjab. however, islamic banking branches are still concentrated in very few regions ; 80 percent of islamic banking branches are concentrated in eighteen big cities only. moreover, at present the share of islamic microfinance is insignificant, though, the inclination of islamic banking institution towards this sector is encouraging. ladies & gentlemen ; there are three challenges to rapid growth for islamic banking : the first is developing new instruments to cover all aspects of banking. we as stakeholders of islamic banking industry should recognize that we cannot move the industry to the next level of growth trajectory unless innovative shariah based solutions for all financial services needs of the clients generally and business community particularly are developed. this highlights the need of research and development to be the core ingredient of the strategy of islamic banking industry. the industry needs to establish knowledge sharing and research platforms to evolve strategies on how best to meet the surging demand for shariah compliant products and services in pakistan. to this end industry can capitalise on strengths and expertise of centres of excellence in islamic finance education that have been established as research incubator and for the capacity building of the industry. moreover, collaboration between academia, shariah scholars and industry professionals can be established through these research centers which will allow synergies along with identifying priority research area. ladies & gentlemen ; the second challenge is capacity building and awareness. the state bank of pakistan, as a regulator performs the role of facilitator for islamic banking industry in the country. in this role, our major focus is on capacity building and awareness raising about islamic banking and finance in the country. to this end we are not only using our training arm, national institute of banking and finance ( nibaf ) for undertaking multiple capacity building programs but have also been page 3 of 4 supportive for such initiatives of industry and academia. while talking about human resource of islamic finance industry, the discussion about role of ulema in promoting islamic banking and finance cannot be ignored. fortunately we are among those countries which are regularly producing good number of shariah scholars with many of those being of international repute. however, with the high growth

would also be befitting to acknowledge the commitment and determination of the government of pakistan towards developing conducive infrastructure for growth of islamic finance industry in the country. formation of a high level steering committee for promotion of islamic banking in pakistan followed by formation of implementation committee for implementing recommendations of the steering committee, issuance of international sukuk after a gap of nine years and allowing tax neutrality for islamic financial institutions and their customers through finance act 2017 are few examples in this regard. i would also like to take this opportunity to applaud other stakeholders of the islamic finance industry for their strenuous efforts in achieving stellar growth. ladies & gentlemen ; islamic financial institutions have the potential to be major contributors towards growth and broad based development of a country owing to their closer link with real economic activities. however, in line with global trends the domestic industry is also concentrated in corporate clients and few big sectors ignoring others that are either unserved or underserved by conventional industry. i believe that given their risk sharing model and ability of financing ventures on the basis of their feasibility, islamic financial institutions can penetrate into underserved sectors like agriculture, small & medium enterprises ( smes ) and housing, particularly low cost housing, which are sectors of paramount importance in terms of their contribution to inclusive and sustainable gdp, employment generation and overall development of the country. this will also contribute towards improving financial inclusion in the country. recognizing the importance of these sectors, state bank of pakistan is persuading the industry to increase their financing to smes and agriculture sectors. we are assigning annual indicative targets to banking industry including islamic banking institutions for sme and agriculture sectors. we at state bank of pakistan do not compromise on stability of the sector and hence fully acknowledge issues like adverse selection and moral hazard linked with participatory based modes of financing particularly to these sectors. however, this challenge demands the industry to diverge from traditional business approaches and develop adequate risk management framework through coordinated efforts. this can enable page 2 of 4 industry to tap these strategically important sectors and create value for their shareholders, depositors and country ’ s economy as a whole. while talking about these unserved sectors i would also like to draw your attention to the fact that like any muslim dominant country financial exclusion in pakistan is voluntary and involuntary. islamic banks can play a key role in minimizing both segments of this incidence. along with significant faith - sensitive voluntary exclusion in the country the prevalence of huge unbanked population in rural