The State Bank of Pakistan would likely grant Faysal Bank Limited a new license this month, allowing it to operate as the country’s second-largest Islamic bank, its official said.
“The conversion of FBL’s operations to Islamic banking is nearly complete. Ninety percent of the bank’s assets, deposits, and balance sheet have been converted to Islamic finance. There is only one conventional branch remaining out of our total of 650 branches, and it will be converted to Islamic as early as next week,” Syed Majid Ali, chief financial officer at FBL said.
According to our plans and discussions with SBP, “we may give up our current license after we convert 85–90 percent of our conventional branches to Islamic”, he said. “We submitted an application for a license to function as a bank that applies the interest-free principles of Islamic finance in all its operations,” Ali added.
“The SBP is expected to approve the bank’s conversion by December 20. We are prepared to surrender our current license on December 31 because everything is going really well. The bank will open as a full-fledged Islamic bank on January 1, 2023, In Sha Allah.”
He said the bank started converting its branches in 2016, with 211 of them becoming Islamic. This was the largest conversion in the world and was extremely complicated due to its extensive branch network, balance sheet size and variety of product offerings.
“We had no role model to follow when we started the conversion process. The main obstacle was where to begin. The difficulties of a continuing strategic shift from a traditional banking system to Islamic banking had to be addressed,” Ali noted.
The Islamic financial sector in Pakistan faces a shortage of qualified, high-quality human resources, he opined.
“We lack the personnel or Islamic bankers necessary to carry out a conversion process. For the bank to convert to Islamic, it must build the required capabilities,” he said, and added that it needs qualified staff who can match the financing instrument to the customer’s needs by comprehending the customer’s business model. Additionally, banks must create Islamic products. They ought to be able to run those products on their systems.
The FBL is completing its conversion journey at a time when the government has intensified efforts to drive Pakistan’s economy away from Riba. The government has already started the process to assure the conversion to Islamic instruments by 2027.—Agencies
