Opening a Bank in Pakistan

Opening a Bank in Pakistan

Introduction

This paper is based on a detailed assessment about the regulatory and operational requirements of setting up a new bank in Pakistan. For this purpose, we chose to open up an Islamic Bank in Pakistan's economic hub, Karachi. The preceding sections of the paper will discuss the role of State Bank of Pakistan in this regard, different requirements of the central body in business set-up and the internal analysis of various departments that may be required by the bank. In short, it will help us see, in a nutshell, the basic requirements of opening up an Islamic Bank in Karachi. We will also discuss and evaluate different technological equipments and software's that may be required for assistance and up gradation along with throwing light into the bank's future plans for expansion. We begin with detailing out the rationale behind entering into the local banking sector.

Motives behind Entering into Pakistani Banking Sector

Banking industry in Pakistan has been dynamic and developing. It has encompassed various categories of financial management through dividing the banking industry into distinct units as per the demands of investors and borrowers. While the local banking industry fulfills the traditional role of providing capital to those who need from the hands of those who have; it also performs various other functions and developed into a radically competitive industry. In Pakistan, the banking industry constitutes one of the largest workforces as compared to any other sector. Islamic banking industry has been promoted and developed in parallel to the conventional banking industry in an integrated and steady fashion. Being an Islamic country itself, Pakistan adheres to Islamic rules and regulations in all aspects of daily life, and condemns the earning of interest-based money as one of the cornerstones of Islamic monetary principles. In this dimension, Islamic finance has been received with welcoming stance, in all spheres of the consumer base. The first Islamic bank in Pakistan was the Meezan Bank that opened in 2002 (Husain, 2007). Since this sector has experienced impressive growth, five Islamic banks and 11 conventional banks are operating as dynamic Islamic banking activities, while more than 799 branches exist throughout the country. The growth and progress of Islamic banks is evident from the following section of a presentation that talks about industry projections and scope of growth:

Taken From: http://www.meezanbank.com/docs/Islamic%20Inter-Bank%20Market%20in%20Pakistan.pdf

The appetite for Islamic financial management has given rise to an ever-expanding network of Islamic banks in Pakistan, particularly Lahore and Karachi. However, this segment needs to be expanded in future, in order to enhance the growth of Islamic finance and motivate more lenders and borrowers into it. Pakistan's capability to stimulate Islamic finance and the interest in the Sector by world-wide public indicates a steady potential for the Islamic industry to flourish in the future. It is hoped that a collaborated effort of the banking sector along with the strategies of the central, governing body (the SBP); Islamic banking industry will flourish to heightened extents, giving way ...