Understand what KIBOR is?
KIBOR as only a pricing benchmark. A pricing mechanism. KIBOR is KARACHI INTER BANK OFFER RATE which is decided daily by almost 20 banks by 11:30 a.m. Kibor is implemented by State Bank so every Islamic Bank has to follow the market rule implemented by State Bank.
The Case of IBOR or IIBOR: KIBOR in Islamic Banking
Islamic Banks Proposed their Islamic Banks Offer Rate which is still to be implemented. Despite a summary is already on the desk of the Governor of the State Bank of Pakistan for the past 10-12 years but it’s not been approved as yet with the issue that Islamic Banks and divisions are not even 30% as compared to the conventional bank’s. Unfortunately in Pakistan IBOR (ISLAMIC BANKING OFFER RATE) is not implemented despite having Trillion of Deposits, so this is the reason State Bank ordered all Banks to make their Islamic windows so that after a decade or so deposit and transaction sizes match up.
