Islamic Banking Industry (IBI) continues to flourish in the country as its assets reached Rs. 3 trillion by the end of 2019.
According to the Islamic Banking Bulletin issued by State Bank of Pakistan (SBP), the assets of IBI grew by 9.6 percent or Rs. 289 billion in the last quarter to reach Rs. 3.284 trillion. Thus, the market share of the IB’s assets in the overall banking industry stands at a quite impressive level of 14.9 percent for 2019.
Since the re-launch of the Islamic banking industry early in 2000 with merely one bank (Meezan Bank), the industry strived hard to penetrate the market with little awareness and acceptance among the general public and consumers of banking services.
Gradually, the industry expanded with the addition of two more full-fledged banks—BankIslami and Dubai Islamic Bank in 2005 and then Al Baraka Bank Pakistan was established after a gap of five years in 2010 showing consistent development of the industry with increasing acceptance and demand in the Muslim majority country.
Meanwhile, many of the conventional banks also set up separate Islamic banking divisions with Islamic names which expanded the size of the industry and is now backed by 17 conventional banks with Islamic banking services.
The Islamic banking Industry-achieved Rs. 1 trillion assets for the first time in March 2014 with their share in the overall banking industry at 9.4%. IBI assets attained its next milestone of Rs. 2 trillion in the next two years and one quarter in June 2017 and its asset share in the overall industry surged to 11.6%. It reached Rs. 3 trillion assets in the next two and a half years in December 2019 with a market share stands at 14.9%.
The ratios of capital to total assets and capital minus net non-performing assets to total assets of the Islamic banking industry were recorded at 6.8 percent and 5.7 percent respectively by the end of December 2019. Both ratios remained lower than the overall banking industry averages.
IBI Deposits, Investments, and Financing
Deposits of the Islamic banking industry surged to Rs. 2.6 trillion by end of December 2019. The market share of the Islamic banking industry’s deposits in the overall banking industry increased to 16.6 percent by the end of 2019.
The share of full-fledged Islamic banks and Islamic banking divisions of conventional banks in overall deposits of the Islamic banking industry stood at 59.7 percent and 40.3 percent respectively.
Liquid assets to total assets and liquid assets to total deposits of the Islamic banking industry stood at 20.8 percent and 25.8 percent respectively by the end of December 2019.
Financing and related assets (net) of the Islamic banking industry also increased to reach at Rs. 1.623 trillion by the end of December 2019. In terms of mode wise financing, the share of Diminishing Musharaka remained the highest in overall financing of the Islamic banking industry with a share of 34.1 percent, followed by Musharaka (19.8 percent) and Murabaha (12.9 percent).
Investments in the Islamic banking industry increased slowly to stand at Rs. 597 billion by the end of December 2019.
The balance sheets of the majority of Islamic banks showed stability and growth as the profit before tax of the Islamic banking industry reached Rs. 66 billion by the end of December 2019.