ISLAMABAD, 28 March 2005 — Dubai Islamic Bank (DIB) comes to Pakistan as banking sector profitability rises on the back of business growth.
Gulf, Saudi Arabian and Middle East groups are now doing more business and showing still larger interest in Pakistan.
The latest major entry from the Gulf into Pakistan is the DIB. Dr. Muhammad Khalfan ibn Kharbash, the UAE minister of state for finance and industry, and chairman of DIB, last week, received the license to open the bank in Pakistan, from Prime Minister Shaukat Aziz.
Aziz said, “Dubai Islamic Bank will prove to be a conduit for bringing more investments from the Gulf Cooperation Countries (GCC) to Pakistan.” “The visit by Dr. Khalfan reflects the strong economic ties between Pakistan and UAE. Opening of DIB will further enhance these relations, in future, among our countries,” Aziz said.
Dr. Khalfan said, “Pakistani economy has seen a turnaround, and continues to maintain a growth trajectory buoyed by falling debt and ongoing reforms. Foreign investors are impressed by Pakistan’s track record of economic performance over the last five years.”
DIB will establish a full service scheduled Islamic bank in Pakistan, with an initial capital of $100 million. Dr. Khalfan said, “DIB will open its five branches in big cities, in the first year. The number will be increased later.
DIB will introduce Islamic banking products and services. We are looking forward to share our expertise with Pakistan to target corporate, retail, commercial and SME business segments, and corporate investment banking opportunities.” Dr. Khalfan also discussed with Aziz, and Dr. Salman Shah, adviser to the prime minister on finance, plans for trade expansion and UAE investment in Pakistan. “We are also interested in Pakistan’s privatization program” under which several mega projects, ranging from energy, petroleum and telecom are due to be sold within weeks. UAE and GCC countries are bidding for some of these projects. DIB, he said, will also focus on financial needs of small and medium enterprises (SMEs) in Pakistan. “DIB plans to offer efficient banking services to the sizeable number of Pakistanis living in UAE and the Middle East, Dr. Khalfan said.”
UAE and Saudi Arabia are among the biggest sources of home remittances sent by overseas Pakistanis working there. Pakistan’s total receipts of remittances in 2004 were $3.9 billion. It expects $4.0 billion in 2005.
Obaid Mishar, chief executive officer of Etisalat, a member of the Dr. Khalfan’s high-level delegation, said, he hopes his company will succeed in its bid for Pakistan Telecommunication Company Ltd. (PTCL) — the giant state-owned telecom company now being sold to private investors. In this case, “with Etisalat and PTCL’s active partnership, we can reach the international market, and give roaming free telephone service to Pakistanis and UAE people.”
DIB comes to Pakistan when banking business is upbeat, credit is expanding fast, and profits are rising by the day. The economy, originally targeted to grow 6.6 percent, is moving toward an 8.0 GDP growth in the current fiscal 2005. In order to feed the economy, the country’s 36 commercial banks — that includes 11 foreign-based and 25 domestic ones — have provided the private business of Rs.322.5 billion credit within the first eight months of 2005 — a historic high. Credit off take in the like period of 2004 was Rs.223.5 billion. Bank deposits in the first eight months rose Rs.215 billion to Rs.2,208 billion. Increase in the like period in 2004 was Rs.125 billion. The overall after-tax profit of 36 banks, in the year to September 2004, was Rs.23.6 billion, 20 percent more than the previous year. Most of this income was derived from stable sources. The share of non-interest income, in the gross income, is 40 percent. The fee-based income rose from 4.5 to 7.3 percent, because of larger foreign trade turnover.