‘Adaptation of Islamic economic system to alleviate poverty’

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‘Adaptation of Islamic economic system to alleviate poverty’

KARACHI: Ex Governor State Bank, Ishrat Hussain has said that Islamisation of economic system, if adopted and practiced in its true form, at any time in the future will strengthen the economy particularly income distribution and poverty alleviation which have proved elusive under the present western economic model.

This will, in fact, eliminate the sources of instability, violence and propensity towards terrorism arising from a sense of deprivation. He expressed these views while delivering a speech on Islam and the future of Economics at a Conference on ‘Islamic Economics and Finance’ organised by IBA at State Bank Building on Saturday.

He said that the introduction of Islamic banking has promoted financial inclusion by bringing those who have so far remained outside the conventional banking system thus deepening the financial sector. “We need to explore the unique features of Islamic finance for the larger good of the society particularly in the context of economic growth and poverty alleviation. Islamic finance can be a powerful tool for inclusive growth and amelioration of the conditions of poor in the Muslim countries,” said Hussain.

Leading Islamic finance experts and Shariah advisors speaking at the Conference said that the phenomenal growth in Islamic Financial sector worldwide is a testimony to its potential and Islamic Economic system could be a role model for the world economies.

Currently, there are over 500 Islamic financial institutions with a total size of $1.2 trillion, over 250 Shariah compliant mutual funds with $300 billion funds; over 133 Takaful companies with $8.8 billion in contribution. Some 207 International Islamic Sukuks were issued till 2007 with a 73 percent growth in comparison with 2006. The speakers and panelists discussed impact of ideology on economic system, Islam and the future of economics, Global & local Islamic banking scenarios, Takaful Models & practices, etc.

Speakers said that Islamic finance and economics is a reality, which is being recognised by IMF, World Bank and Basel Committee. Establishment of bodies like IIFM, IFSB, CIBAFI etc as well as Islamic indices such as Dow Jones and FTSE is a sign of its acceptance while global hubs of Islamic finance include London, Bahrain & Malaysia.

They said Shariah & Accounting Standards for Islamic financial institutions (AAOIFI) have already been laid down and more then 60 countries have Islamic Banking Institutions out of which approximately 37 are Muslim countries including Kuwait, Dubai, Saudi Arabia, Iran Malaysia Brunei and Pakistan while approximately 23 non-Muslim countries including USA, UK, Canada, Switzerland, Srilanka, South Africa and Australia have Islamic financial institutions. Speakers said that different types of IFIs have emerged globally such as Islamic Commercial Banks, Islamic Investment Banks, Islamic Units of conventional banks, Islamic Funds, Islamic House Financing Schemes, International Financial Market and International Institutions of Islamic Banking.

Currently, Pakistan has six full fledged Islamic Banks: Meezan Bank, Al-Baraka Islamic Bank, Dubai Islamic Bank, BankIslami Pakistan, Emirates Global Islamic bank and First Dawood Islamic Bank. Many conventional banks are operating Islamic Banking Branches that include Bank of Khyber, MCB Bank, Bank Alfalah, Habib Metropolitan Bank, Bank Al Habib, Standard Chartered Bank, Soneri Bank, HBL, UBL, Askari, NBP, RBS, etc. Speakers said that Islamic Banking is growing rapidly in Pakistan with 649 branches of dedicated Islamic banks and Islamic banking sections of conventional banks. Their asset base is approximately Rs 366 billion while their deposit base is approximately Rs 283 billion. The share of Islamic banks in the overall Banking system stands at 5.9 percent approximately.

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