The State Bank of Pakistan (SBP) on Wednesday issued revised instructions for banks to expand the scope of Islamic banking to 25 per cent assets and deposits of the country’s banking industry by 2023.
The SBP said that keeping in view the significant potential of the Islamic Banking Windows (IBWs) in enhancing the share and outreach of shariah-compliant financial services and increase in financial inclusion, it has issued revised instructions for banks to expand the scope of operations of IBWs.
The IBWs can now offer all types of financing products to their customers including corporates, small and medium enterprises, agriculture, housing, and consumers. However, this facility is subject to the condition that respective IBW branch will be converted into full-fledged Islamic banking branch within a period of three years.
“It is expected that this new policy measure will contribute towards achieving the targets set under the National Financial Inclusion Strategy for Islamic banking, which envisages attaining a share of 25pc in total assets and deposits of the banking industry and 30pc share in total branch network of the industry by the end of 2023,” said the SBP.
At present, Islamic banking products and services are being offered by full-fledged Islamic banks, Islamic banking subsidiaries and Islamic banking branches of conventional banks after getting approval and license from the SBP.
Conventional banks can open IBWs, which are dedicated counters in conventional branches, after getting permission from the SBP; however, they are not allowed to offer any financing products.
“With 1,400 IBWs of 11 banks currently operational in the country, their potential to improve access to finance will increase significantly,” said the SBP, adding that it will contribute towards increasing financial inclusion through provision of shariah-compliant financing facilities to vast majority of population.
The revised instructions also incorporate different amendments or additions to existing regulations and include policy formulation on IBWs, submission of annual expansion plan, physical setup and display requirements, opening and closure of IBWs, their fee structure, and revisions in reporting requirements.
“These revised instructions will supersede all previous instructions issued on IBWs by the SBP from time to time,” it added.