SBP Asks Banks to Enhance Islamic Banking Footprint From 2023

The State Bank of Pakistan (SBP) has directed commercial banks to enhance their Islamic banking footprint in order to promote the Islamic banking system in the country. SBP Asks Banks to Enhance Islamic Banking Footprint From 2023

According to the circular issued to banks, it has been decided to allow banks and MFBs having Islamic banking operations to revise their Annual Branch Expansion Plan (ABEP) for 2023 to the extent of including additional Islamic banking branches, offices, and conversion proposals.

The announcement was made in light of official policy, which calls for the end of riba-based economics and banking in the country within the next five years.

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Since the majority of the country’s population favors this model over interest-based banks, this has led to the development of an alternative banking system, namely the Islamic banking system, which has been developing by leaps and bounds throughout the country.

As suggested by the ABEP 2023, these commercial and microfinance banks (MFBs) may replace conventional banking branches and offices with Islamic banking branches and offices.

In addition, banks and MFBs that do not plan to grow during 2023 are urged to submit their ABEP-2023, which may include recommendations to convert to Islamic banking or open new branches.

So, financial institutions and MFBs that care can update their ABEP-2023 by December 16 to include as many new Islamic banking branches, offices, and conversion proposals as possible.

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Jameel Ahmed, Governor SBP, said at a recent conference hosted by the National Institute of Banking and Finance (NIBAF) and the Institute of Cost and Management Accountants of Pakistan (ICMA Pakistan) that the transition from a conventional to a Sharia-compliant mode in light of the decision of the Federal Shariat Court and the development of digital technologies presents a significant opportunity for the expansion of the banking sector.

He restated SBP’s unflinching commitment to the advancement of digital transformation and Islamic banking transformation within the financial sector.