Pakistan’s first and largest Islamic bank, Meezan Bank Ltd, said it was looking for opportunities to set up an Islamic bank in India.

“India and Pakistan have cross-cultural similarities and we think there is immense potential for Islamic banking here. We have been discussing this internally and if regulatory hurdles are cleared, we may set up a branch here,” Muhammad Raza, Executive Vice-President and Head-Consumer Banking, Meezan Bank, told Business Line.

Speaking on the sidelines of the National Housing Bank conference here, Raza said his bank was also looking to open branches in Malaysia and the UK, among others.

Islamic banking refers to a non-interest-based system of banking or banking activity that is consistent with the principles of the Shari'ah (Islamic rulings).The principles largely emphasise on moral and ethical values in all dealings. Shari'ah prohibits the payment or acceptance of interest charges for lending and accepting money, among others.

Meezan Bank, which also provides housing finance, said Islamic banking had been growing at about 50 per cent year-on-year globally.

Raza said Islamic banking’s overall share in the mortgage business was about 25 per cent. “One out of every four mortgage is from an Islamic bank,” adding that even in the UK, Islamic banking was growing fast.

Musharakah model

On the lending model, Raza said Islamic banking followed the Musharakah model, which literally means sharing. “We enter into joint partnership in which partners share the profit and loss of the enterprise. This means the banks shares the ownership and risks,” he said.

Illustrating this with an example, Raza said assuming a consumer approached the bank for a five-year loan, the bank divides the mortgage into 60 units and charges a rent on each unit. As the loan term decreases, the rent on the units also decreases.

Raza said Meezam Bank lends as low as Rs 3 lakh to a maximum of Rs 5 crore for residential projects.

(This article was published on April 12, 2013)
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