Islamic banking assets doubled, reach Rs1.6 trillion in five years

ISLAMABAD: The assets in Islamic banking doubled to Rs1.6 trillion in 2016 from Rs837 billion in 2012, accounting to a share of 11.7 percent in the total banking assets, a statement said on Saturday.

There is an even stronger growth of Islamic assets in the non-banking financial institutions (NBFIs). Their market share is now approaching 33percent from 14 percent in 2012, it added.

This growth is attributable to the demand from customers and enabling regulations by the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP). This was highlighted at a seminar held at the SECP’s head office.

Usman Hayat, head of the Islamic Finance Department at the SECP, said that developing Islamic capital market is a priority of the regulator. The SECP has recently conducted two consultation sessions with market participants to facilitate issuance of sukuk and real estate investment trust (REIT), he added.

The SECP is analysing the industry proposals and it would consider making appropriate amendments to the relevant regulations, further reducing the cost and hassle for both issuers and investors. The industry proposals pertaining to tax issues regarding sukuk and REIT are being referred to the Federal Board of Revenue (FBR), Hayat said.

Ghulam Muhammad Abbasi, head of the Islamic Banking Department at SBP, made a comprehensive presentation on the evolution of Islamic banking in the country.

After a prolonged debate about which model to follow, the policymakers decided in 2001/02 to allow both Islamic and conventional banking in parallel, he added.

At present, 21 banking institutions are offering Islamic banking services in the country through 2,322 branches in 112 districts across the country.

The SBP has a holistic approach to the promotion of Islamic banking and is providing enabling policy environment, Shariah governance, risk management and capacity-building.

Abbasi said that the SBP has been adjudged as the “Best Central Bank for Promoting Islamic Finance” by Islamic Finance News in 2015.

Dr Shafiullah Jan from IMSciences said that the economic substance in Islamic banking may seem to be the same as that of conventional banking, but the underlying process is different.

Along with the growth of the industry, more attention needs to be paid as to why this industry was created and if it is delivering on the Islamic vision of development that it is associated with, he added.

The SECP organised the seminar in collaboration with the SBP and the Center for Excellence in Islamic Finance at the IMSciences Peshawar.

Representatives of the SECP, SBP, Ministry of Finance, Zarai Tarraqiati Bank, Central Directorate of National Savings and the faculty and students from IMSciences attended the event.