Pakistan aims for Islamic banking rise in rural areas

(Ahlul Bayt News Agency) - Pakistan, bidding to nearly double Islamic banking in the South Asian state by 2015, is focusing on poor, conservative villages to drive growth and has ordered Islamic lenders to open 20 percent of all new branches in rural areas.

Islamic banking will help draw the funds of rural customers, a less sophisticated client base who also traditionally shun conventional banks due to concerns over interest which is forbidden under Islam, said Saleem Ullah, director of the Islamic banking department at the State Bank.

"Islamic banking, primarily being a faith-driven industry, has a significant potential in Pakistan as the concept directly appeals to the religiously sensitive segment of the society," Ullah said. "The share of the industry in the banking system has risen to over 7 percent from just 0.5 percent in 2002."

Pakistan's plan is to raise that figure to 12 percent from 7 percent currently by 2015.

Islamic finance growth has faced challenges due to the worsening geopolitical and security situation in Pakistan. But with a population of around 180 million Muslims, the small South Asian nation is still considered as one of the hottest growth areas for the industry.

Pakistan has five fully fledged sharia-compliant banks and 12 conventional banks with Islamic operations, creating a network of 800 branches in Pakistan. Ullah anticipates that 150 new branches will open by the end of the year.

Islamic banking currently accounts for 497 billion rupees ($5.74 billion), or 7.3 percent of the country's overall banking system.

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