Islamic banks urged to serve small enterprises

The needs of small and medium enterprises (SMEs) are still not catered to by Islamic banks, stressed participants at a seminar on Islamic banking held at the Karachi Chamber of Commerce and Industry (KCCI) on Wednesday.“India and China are at the forefront of the global economic recovery and both countries have done this by focusing on the SME sector,” said President KCCI Saeed Shafiq while highlighting the importance of facilitating the sector for economic growth.
Islamic banks urged to serve small enterprises

Islamic banks urged to serve small enterprises

He pointed out that while other countries were spurring employment and growth through the promotion of small businesses, a uniform definition of SMEs was yet to be developed in Pakistan. “The financial sector is still not concentrating on providing tailored services to this segment.”
The business community representative went on to say that even though organisations were inclined to work with Islamic banks on the basis of moral satisfaction, the cost of doing business with them still remained higher compared to conventional banks. “No business wants to erode its bottom line,” he said, stressing the need for making these banks more competitive. Al Baraka Bank (Pakistan) Limited Country Head Shafqat Ahmed asserted that Islamic banks are all set to capture 12 per cent of the country’s total banking industry by 2012.
“Introduction of a wider range of services that offer alternatives from conventional institutions will be crucial in increasing the acceptance of Islamic banks,” he said, admitting that the current market share of six per cent was low.
Ahmed explained that Islamic banks only gained official recognition through the State Bank in 2003. “At present, five dedicated Islamic banks are operational in the country along with 13 conventional banks offering Islamic banking services.” The total network of Islamic banks in the country currently stands at 650 branches with a combined asset base of Rs450 billion.
The needs of small and medium enterprises (SMEs) are still not catered to by Islamic banks, stressed participants at a seminar on Islamic banking held at the Karachi Chamber of Commerce and Industry (KCCI) on Wednesday.
“India and China are at the forefront of the global economic recovery and both countries have done this by focusing on the SME sector,” said President KCCI Saeed Shafiq while highlighting the importance of facilitating the sector for economic growth.
He pointed out that while other countries were spurring employment and growth through the promotion of small businesses, a uniform definition of SMEs was yet to be developed in Pakistan. “The financial sector is still not concentrating on providing tailored services to this segment.”
The business community representative went on to say that even though organisations were inclined to work with Islamic banks on the basis of moral satisfaction, the cost of doing business with them still remained higher compared to conventional banks. “No business wants to erode its bottom line,” he said, stressing the need for making these banks more competitive. Al Baraka Bank (Pakistan) Limited Country Head Shafqat Ahmed asserted that Islamic banks are all set to capture 12 per cent of the country’s total banking industry by 2012.
“Introduction of a wider range of services that offer alternatives from conventional institutions will be crucial in increasing the acceptance of Islamic banks,” he said, admitting that the current market share of six per cent was low.
Ahmed explained that Islamic banks only gained official recognition through the State Bank in 2003. “At present, five dedicated Islamic banks are operational in the country along with 13 conventional banks offering Islamic banking services.” The total network of Islamic banks in the country currently stands at 650 branches with a combined asset base of Rs450 billion.

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