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First set of Questions

Explore the reliability and realism of future growth in Islamic finance and the potential benefits for Muslim households, businessmen, bankers, the economy, and the global financial system.

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First set of Questions

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  1. A Talk on“Future of Islamic Finance”ByDr. M. Fahim KhanIslamic Banking DepartmentState Bank of PakistanMay 10, 2012

  2. “With Britain now in talks to sell part of the government’s 82% stake in the Royal Bank of Scotland to Abu Dhabi sovereign-wealth funds, the Islamic world’s growing financial clout is once again on display. That clout also poses a systemic challenge to the dominant way that finance is now practiced around the World”

  3. First set of Questions Future predicted on Past Trend (15% growth per annum)* • Is it reliable • Is it realistic *Source: Gulf Times April 16, 2012, The Challenge of Islamic Finance

  4. Global Growth of Islamic Banking

  5. Growth of Islamic Banking

  6. Second Set of Questions • The question is, so what? • Is it good, If yes, in what sense? • For Muslim Households to make savings grow • For Muslim Businessmen to get access to capital • For Islamic bankers to make profit • For Central Bank to mobilize resources • For Economy to play key role in Growth and prosperity • For giving the world a better alternative financial system • If No, What next

  7. Hypothesis 1 Future growth should come from increasing demand for Islamic Banking and financial services. If Muslims really demand Islamic finance then Where and how is this demand being expressed?

  8. Hypothesis 2 Islamic banking is faith based. And the faith is Islam. It means it is very clear what Islamic banking is. • This is not the case. The diversity of Fiqh opinion among Shari’ah scholars is making it difficult day by day to offer services which majority, if not all, Muslims will accept as Islamic.

  9. A year after Qatar asked conventional banks (in the beginning of 2011) to stop offering Islamic financial services, an expected windfall for its Islamic banks has yet to materialize. Nor is it clear that banks’ customers are benefiting from the policy.

  10. Islamic Banks will have to decide “Whether they want to fully exploit the Islamic banking niche or compete head on with conventional banks,” Says Cyril Garbois, Partner, A.T. Kearney Middle East.

  11. The best option for Islamic Banks to maintain their growth momentum is. . . • “to exploit Islamic banking niche by targeting customer segments that care most deeply about Sharia compliance in their financial dealings, as well as offering products and services that meet not only general financing but also Muslim-specific customer needs” such as those relating to asset management or wealth management.

  12. Perception 1:Islamic banking should benefit poor too. • Islamic banks should be mandated to have substantial Zakah and Sadaqaat activities. If they do not do it then there is no real argument for their existence. • Collecting voluntary Zakah and manage it to meet the needs of the poor people in the community should be as important for Islamic banks as the deposits and financing are.

  13. Perception No.2: Islamic banking should provide capital with no interest. • A common man particularly in low income groups cannot understand that markup is not interest. • Every Islamic bank should have a micro finance department supported by Sadaqaat and Zakah to provide interest free capital in the form of machinery, equipment and merchandize.

  14. I think it is time for the State Bank of Pakistan to integrate Islamic banking, Zakah and Sadaqaat and Microfinance. • Islamic banks should be provided with a framework to offer all these services under one roof.

  15. CNN Report • CNN conducted a poll on its Arabic website and asked the following question: “Do you believe that Islamic banks differ from conventional banks in terms of their transactions complying with Islamic Shari'ah law” • CNN reported it on air that out of 1,974 people who responded to this poll; • 88% voted "No" and 12% "Yes."

  16. Conclusion • If Islamic banking industry wishes to remain competitive, it must take a different course, restore its identity, and win back the trust of its customers by caring more about quality rather than quantity. • The industry should also avoid financial products or services that contain doctrinal disputes. They rather only utilize products that enjoy consensus, according to the principles set by the Quran and Sunnah

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