Digitization of Islamic Financial Services Must For Pak Economy

Adviser to Prime Minister (PM) on Finance and Revenue Shaukat Tarin on Tuesday asked financial institutions, concerned regulatory and supervisory bodies to take the lead to bring positive change in the financial system through increased focus on ‘digital transformation of Islamic financial services for long-term success and sustainability.

Addressing the inaugural session of the 10th Annual Islamic Finance Expo and Conference (IFEC) 2021 as Chief Guest through a video link, Tarin assured the government’s commitment to the development and strengthening of the Islamic financial industry in the country.

He said the Islamic financial system has a huge potential. It has experienced healthy progress in the last few years. Roughly 1500 Islamic financial institutions are operating around 80 countries including Pakistan. The role of the Islamic economic system is to bring greater justice to achieve socio-economic development and fulfillment of the needs of society.

He stressed the need for collective efforts and commitment from various stakeholders to identify opportunities, issues, and challenges within the system. “Islamic financial institutions and concerned regulatory and supervisory authorities take the lead to bring positive change in the financial system through increased focus on socially responsible investment and digital transformation of Islamic financial services for long term success and sustainability,” the adviser said.

He said some 900 years ago Imam Ghazali pointed out that Riba is prohibited. While the Riba-free system possesses the elements of the development of real economy, social justice, transparency, and equity and property rights.

Deputy Governor State Bank of Pakistan (SBP) Sima Kamil while addressing as keynote speaker focused on three main areas including the customer-centric view of digital transformation, what the state bank is doing, and how Islamic banks can progress using digital transformation.

She said the SBP is the custodian of payment systems and it has the objective that the payments system should be modern, stable, and secure. Now we have moved to Rast – an instant payment system that enables end-to-end digital payments among individuals, businesses, and government entities instantaneously. “We are soon bringing a person to payment (PtoP) system. We will be issuing the digital banking licenses in the next phases,” she informed.

The area, on which we all have to work on is digital lending, which is also part of digitalization. An App is only the beginning of digitalization, she said.

She said that Islamic banks have no legacy issues, which is an advantage for digital transformation. SBP projected share of Islamic banking industry [in assets and deposit] to increase at 30 percent by 2025 from the existing around 18 percent.

“As we talk about some 82 million accounts, but the question is, are they truly financially included, what are we offering to them?” Digital banking needs to be able to fulfill the customers’ needs. An account holder, who deposits or withdraws cash from a bank, is not the inclusion. Inclusion must have lent to various sectors such as agriculture, SMEs, trading, etc. Banks have to look beyond simply transactions if they have to be truly digital ones, Sima added.

A recorded video statement of Dr. Mahatir Muhammad former Prime Minister of Malaysia was also released on this occasion. He said the first Islamic bank was established in Malaysia in 1983. Later on, the conventional and commercial banks were also allowed to open Islamic banking products and services under the Islamic banking system. The customer migration to Islamic banking was initially slow, but later on, even non-Muslims utilized financial tools and services offered under the Islamic banking system.

In his message, Dr. Mahatir said if the Muslim nation is stable both economically and politically, the Islamic economic system will continue to grow and transform.

Ateeq Ur Rehman, an economic & financial analyst who is also coordinator of IFEC discussed issues of easy access to finance especially for lending to SMEs, small traders, vendors, transporters, and exporters. He emphasized refinance schemes for the common man at the grassroots level due to towering inflation and rising utility prices like electricity, gas, and POL.

Prominent speakers of the session included Irfan Siddiqui President & Ceo Meezan Bank Ltd, Yousaf Hussain President & Ceo Faysal Bank Ltd, Syed Amir Ali President & Ceo Bank Islami, Siraj Uddin Aziz CEO Group Financial Institution Habib AG Zurich, Ghulam Muhammad Abbasi Director Islamic Banking Department SBP, Mehmood Tareen CEO TPN and Muhammad Raza Group Head Customer Support Services, Meezan Bank Ltd.

Mostly the speakers spoke about the digitalization of Islamic Banking, Shariah Complaint/ Riba-free Financing including consumer financing.

The other two panel discussions were on Post Covid-19 growth and challenges of non-banking financial institutions and the role of utilization in Islamic Finance for inclusion, sustainability, and ethics. The event was organized by The Professionals Network at a local hotel.

Originally published on www.brecorder.com