Islamic Banking industry continues its upward trajectory

The Islamic Banking industry continued its upward trajectory in Pakistan as the market share of the IBI’s rose to 15.3 percent witnessing a jump of one percentage point from 15.2 percent during the year till June 2020.

As per the State Bank of Pakistan (SBP) Islamic Banking Bulletin, during the quarter under review (April-June 2020), the asset base of the Islamic banking industry (IBI) grew by 8.1 percent to reach to Rs 3,633 billion while deposits of IBI stood at Rs 2,946 billion depicting quarterly growth of 9.5 percent; YoY growth was recorded 21.4 percent and 22 percent for assets and deposits, respectively.

Similarly, ‘financing & investments (net)’ recorded quarterly growth of 15.5 percent and reached Rs 2,597 billion, whereas, the YoY growth was 20.8 percent.

In terms of market share, the Islamic banking industry now stands at 15.3 percent and 16.9 percent, respectively in assets and deposits of the overall banking industry. Moreover, at the end of the reporting period, profit before tax of IBIs stood at Rs 49 billion.

The assets of the Islamic banking industry increased from Rs 3,360 billion to Rs 3,633 billion at the end of June 2020. It was a significant increase of Rs 273 billion compared to the corresponding increase of Rs 202 billion during 2019. At the end of June 2020, the market share of the Islamic banking industry’s assets in the overall banking industry’s assets increased from 15.2 percent to 15.3 percent.

The deposit base of IBIs increased by 9.5 percent i.e. Rs 254 billion to Rs 2,946 billion at the end of June 2020 showing a YoY increase of 22 percent, slightly higher than the growth in the deposit base of the overall banking industry, which saw an increase of 9.3 percent and YoY rise of 14.3 percent during the period under review.

The growth in deposits largely came from customer deposits of varied kinds, in particular, non-remunerative current accounts and saving deposits.

At the end of June 2020, the infrastructure of the Islamic banking industry remained the same with 22 Islamic banking institutions (IBIs); 5 full-fledged Islamic banks (IBs), and 17 conventional banks having standalone Islamic banking branches (IBB's). However, the branch network of IBIs increased from 2,913 branches to 3,274 branches during FY 20. As evident from Figure-1, the major share of branches is concentrated in Punjab, followed by Sindh and Khyber-Pakhtunkhwa (KPK). The number of Islamic banking windows (dedicated counters at conventional branches) operated by conventional banks having Islamic banking branches (IBBs) stood at 1,394.