Karachi, November 12, 2024 – Dr. Ashrat Hussain, the former governor of the State Bank of Pakistan, underscored the formidable challenges facing the nation’s transition to an Islamic financial system during his keynote address at the 8th International Conference on Islamic Banking & Finance (ICIBF – 2024) in Karachi. Speaking to an audience of policymakers, financial experts, and industry stakeholders, Dr. Hussain emphasized that while the government and the State Bank are committed to the shift, substantial hurdles remain.
Dr. Hussain remarked, “Proposing an Islamic system to Parliament and the judiciary was straightforward, but the real test lies in garnering active participation from other ministries and provincial governments. Currently, our tax framework is misaligned with Islamic principles, which complicates the transition.”
He further critiqued the broader economic governance, stating, “There is a pervasive lack of accountability in Pakistan’s management of resources. The continued wastage without repercussions indicates a systemic failure that must be addressed alongside financial reforms.”
Addressing the capacity of Islamic banks to support governmental financial needs, Dr. Hussain posed critical questions: “Can Islamic banks effectively finance the government’s fiscal deficits? These are pressing issues that we must resolve before the targeted transition by January 2028.”
Deputy Governor of the State Bank, Saleemullah, echoed these concerns, highlighting the extensive scope of the transformation. “Transitioning to an Islamic financial system is an immense undertaking that requires coordinated efforts from all stakeholders. It’s not merely about adopting Islamic banking practices but overhauling the entire financial infrastructure to reflect Islamic values.”
Saleemullah expressed cautious optimism regarding the potential benefits of the transition. “A genuine Islamic financial system goes beyond banking; it encompasses all facets of economic activity. Developed nations have historically compromised their financial systems for industrial growth, but we have the opportunity to build a more ethically aligned and sustainable framework.”
He stressed the urgency of the initiative, noting, “In today’s global economy, establishing an Islamic financial system is not just an option but a matter of survival. The question remains: Can Pakistan present a viable Islamic financial model to the world? I anticipate that the discussions and solutions will emerge from this conference.”
The conference also addressed the broader economic implications of adopting an Islamic financial system, including potential impacts on foreign investment, economic stability, and compliance with international financial regulations. Experts debated the feasibility of aligning existing financial institutions with Shariah law, the need for specialized training for banking professionals, and the development of new financial products tailored to Islamic principles.
Moreover, the dialogue extended to the role of technology in facilitating this transition. Fintech innovations, blockchain for transparent transactions, and digital banking solutions were highlighted as critical components that could support the seamless integration of Islamic finance into Pakistan’s economy.
Industry analysts believe that Pakistan’s move towards an Islamic financial system could position the country as a leader in ethical finance in the region, attracting investment from Muslim-majority countries and enhancing its economic sovereignty. However, success hinges on overcoming bureaucratic inertia, ensuring regulatory coherence, and fostering a culture of accountability and transparency within financial institutions.
As Pakistan navigates this complex transformation, the insights shared by Dr. Hussain and Saleemullah at the conference underscore the need for a strategic, inclusive approach. The forthcoming months will be crucial in shaping policies and frameworks that could redefine Pakistan’s financial landscape for decades to come.
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