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Islamic Banks Achieve 15% Share in Overall Assets of Pakistan’s Banking Industry

With consistent growth in operations and business coupled with acceptance among the customers across the country, Islamic banks, and Islamic banking windows have achieved a 15.1 percent share in the assets of the overall banking industry in Pakistan.

According to the State Bank of Pakistan (SBP), the asset value of the Islamic banks and Islamic banking windows increased to Rs. 3.36 trillion by the end of March 2020 compared to the total assets of Rs. 22.1 trillion of the overall banking industry including commercial banks, Islamic banks, and microfinance banks.

Islamic banking industry consists of 5 full-fledged banks and Islamic banking windows of 17 conventional banks operating with a network of 3,250 branches countrywide.

The asset quality indicators of the Islamic banking industry including non-performing finances (NPFs) to financing (gross) and net NPFs to net financing increase and were recorded at 5 percent and 2.6 percent respectively by the end of March 2020 as compared to 9.1 percent and 1.8 percent of the overall banking industry.

Liquid assets to total assets and liquid assets to total deposits of the Islamic banking industry stood at 20 percent and 24.9 percent, respectively by end-March, 2020 as compared to 49.8 percent and 69.8 percent of the overall banking industry.

Financing to deposits ratio (net) of the Islamic banking industry was recorded at 60.7 percent by end-March, 2020 compared to 51.4 percent of the overall banking industry.

The financing and related assets (net) of the Islamic banking industry reached at Rs. 1.634 trillion by end-March 2020.

Major Indicators of Islamic Banking Industry

The profit before tax of the Islamic banking industry was recorded at Rs. 21 billion by end-March, 2020. The deposits of the Islamic banking industry were recorded at Rs. 2.692 trillion, which is 16.9 percent of the overall deposits’ value of the industry. The investment of the Islamic banking industry stood at Rs. 615 billion by the end of March 2020.

The full-fledged Islamic banks recorded handsome growth during the first quarter of 2020 whereas the Islamic banking windows of the conventional banks also contributed handsomely to the balance sheet of their respective banks.

With the business model of Islamic banking gaining further maturity and rising awareness among the stakeholders, the Musharaka based products continued to gain popularity compared to other Islamic modes.

Accordingly, the combined share of Musharakah (Running Musharakah and Diminishing Musharakah) increased to over 50 percent in overall Islamic financing. These products cater to the varying needs of different segments, thus pose no concentration risk.

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