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Citibank Seeks Islamic Banking License

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    Islamic Banking Fast Growing in Pakistan http://www.islamonline.net/English/News/2005-01/31/article02.shtml Citibank is one of many banks negotiating with the
    Message 1 of 1 , Feb 1, 2005
      Islamic Banking Fast Growing in Pakistan
      http://www.islamonline.net/English/News/2005-01/31/article02.shtml

      Citibank is one of many banks negotiating with the Pakistani
      government to get an Islamic banking license


      KARACHI, January 31 (IslamOnline.net & News Agencies) – Responding
      to a growing appetite among local residents, foreign-based banks are
      showing increasing interest to introduce banking products in
      Pakistan modeled on the Islamic principles.

      "Almost all the strong and major banks are negotiating with us,"
      Pervez Said, director of the Islamic banking department at
      Pakistan's state bank, told Agence France Presse (AFP) Sunday,
      January 30.

      Said was referring to ongoing negotiations between the Pakistani
      government and major banks such as Citibank, ABN Amro and seven
      other banks to get Islamic banking licenses.

      Pakistan has been witnessing a growing inclination for Islamic
      banking over the past 18 months.

      Some 23 branches of two fully-fledged Islamic banks, one local and
      one foreign-based, have been recently opened in the country. Also,
      nine conventional banks, including Standard Chartered and AG Zurich,
      have 25 branches across Pakistan.

      "Islamic banking is here to stay. They are not coming out of some
      religious fervor but because there is a strong consumer push," Said
      added.

      "A reasonable expectation is that by 2010 about 20 percent of
      conventional banking might come into the ambit of Islamic banking,"
      Said explained.

      Interest is banned under the Islamic banking system, as the religion
      forbids usury. "Murabaha" is a classic practice of Islamic banking,
      under which a borrower has to pay an extra amount agreed in advance.

      This amount is regarded as a "reward" for the risk taken by the
      bank. Islamic banks also typically take part in joint investments,
      sharing in the profits or the losses of a business venture.

      Flourish

      Being aware of the increasing desire among local citizens in
      Pakistan, many banks have shown interest in introducing products
      modeled after Islamic laws, according to AFP.

      "There is tremendous market potential for Islamic banking in
      Pakistan, as surveys show there is a high commitment level that will
      push demand higher," said Hasan Aziz Bilgrami, chief executive of
      the Bank Islami Pakistan (Islamic Bank of Pakistan).

      Bank Islami is getting ready to launch more than half a dozen
      branches next month.

      It will be the third full-on Islamic bank in the Muslim country,
      with 25 percent equity from Britain's DCD Group, a property and real
      estate business which also has core shares in the Islamic Bank of
      Britain, he said.

      "We expect to tap the potential of Pakistan's 90 percent-plus Muslim
      population, who have the highest commitment to their faith,"
      Bilgrami said.

      The growing banks' interest to introduce Islamic banking in the
      country was welcomed by local citizens.

      "I never went for conventional banking as it is based on interest,
      which is prohibited in Islam and amounts to waging war against
      Allah," Moeenul Haque, a Pakistani dealer in imitation gold and
      silver ornaments, told AFP.

      "Now I have my bank account in an Islamic bank and it satisfies my
      faith."

      Islamic Bonds

      Assets of conventional banks in Pakistan hit 2.3 trillion rupees or
      about 40 billion dollars till 2004, according to government
      statistics.

      In an attempt to activate the capital and financial market in the
      country, Pakistan launched road-shows for its first Islamic bonds,
      named Sukuk, according to AFP.

      "There has been tremendous success during the road-shows in the
      Middle East, and HSBC and Citibank are said to have underwritten
      Islamic bonds worth 600 million dollars," said Fazal Ahmed, chief
      financial officer of the Islamic Investment Bank.

      He added that Pakistan followed Malaysia and Bahrain -- considered
      the role models of Islamic banking -- while it formulated its own
      regulations.

      He added that Pakistan followed Malaysia and Bahrain -- considered
      the role models of Islamic banking -- while it formulated its own
      regulations.


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