Islamic banking market share slightly up to 15.3pc



Islamic banking market share has increased less than a percentage point to 15.3 percent during the year to June, according to the central bank’s bulletin.
“In terms of market share, Islamic banking industry now stands at 15.3 percent and 16.9 percent, respectively in assets and deposits of the overall banking industry,” the State Bank of Pakistan (SBP) said in a quarterly report. “Profit before tax of IBIs (Islamic banking institutions) stood at Rs49 billion during FY2020.” The asset and deposit market shares were 14.4 and 15.9 percent in June 2019.
There are 22 IBIs, 5 full-fledged Islamic banks and 17 conventional banks having standalone Islamic banking branches. Branch network of IBIs increased from 2,913 branches to 3,274 branches during FY20. Major share of branches is concentrated in Punjab, followed by Sindh and Khyber Pakhtunkhwa. The number of Islamic banking windows (dedicated counters at conventional branches) operated by conventional banks having Islamic banking branches (IBBs) stood at 1,394. Assets of Islamic banking industry increased to Rs3.6 trillion at the end of June 2020.
“It was a significant increase of Rs273 billion (8.1 percent) compared to the corresponding increase of Rs202 billion (7.2 percent) during 2019,” said the SBP.
Assets of full-fledged Islamic banks saw a quarterly growth of 6.5 percent and 20.1 percent year-on-year to Rs2.1 trillion at June-end. Assets of IBBs witnessed a rise of 10.6 percent quarter-on-quarter and 23.3 percent year-on-year to Rs1.4 trillion. Share of IB and IBBs in overall assets of Islamic banking industry were recorded at 58.8 percent and 41.2 percent, respectively.
Net financing and investments constituted the lion’s share of 71.5 percent in total assets of the Islamic banking industry, though lower when compared with the overall banking industry’s share of 80.3 percent. In April-June, investments of IBI increased considerably to the tune of 46.3 percent or Rs284.6 billion, and were recorded at Rs899.2 billion compared to a deceleration of 1.8 percent in corresponding period of 2019.
“This increase in investments is mainly owing to issuance of government sukuk of Rs198.2 billion during the period under review,” the SBP said.
Breakup of the data between IBs and IBBs revealed that financing and related assets of IBs saw a quarterly rise of 4.4 percent or Rs40.4 billion to Rs 963.7 billion, whereas, financing and related assets of IBBs experienced a growth of 3.3 percent or Rs23.2 billion to Rs734 billion. In terms of mode wise financing, the share of diminishing Musharakah remained the highest in overall financing of Islamic banking industry with a share of 31.2 percent, followed by Musharakah (21.3 percent) and Murabaha (13.4 percent).
In terms of sector wise financing, production and transmission of energy retained its leading position with a share of 14.7 percent in overall financing of Islamic banking industry, followed by textile (14.2 percent) and individuals (9.5 percent) at the end of June 2020. In terms of clients, the corporate sector had the substantial share and accounted for 71.9 percent in overall financing of Islamic banking industry, followed by commodity financing and consumer financing with shares of 14.3 percent and 9.2 percent, respectively.
Further, the share of small and medium enterprises and agriculture financing in overall financing extended by IBIs were recorded at 3.1 percent and 0.3 percent, respectively. Asset quality indicators of IBIs including ‘nonperforming financing (NPFs) to gross financing and net NPFs to net financing decreased from 5 percent and 2.6 percent at the end of March 2020 to 3.3 and 0.7 percent, respectively at the end of June 2020, “owing to decrease in NPFs depicting a positive trend in asset quality,” said the SBP.
Deposit base of IBIs increased 9.5 percent quarter-on-quarter and 22 percent year-on-year to Rs2.9 trillion at the end of June, slightly higher than the growth in deposit base of overall banking industry, which saw an increase of 9.3 percent quarter-on-quarter and 14.3 percent year-on-year during the period under review.—Agencies


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