Islamic banking assets increase to Rs1.885 trillion in first quarter

KARACHI: Assets of the Islamic banking industry (IBI) rose 16 percent to $1.885 trillion in the first quarter (January-March) of 2017 due to increased financing to the private sector, the central bank’s bulletin on Islamic banking said on Friday.

The Islamic banking assets stood at Rs1.625 trillion in the corresponding period of last year. The Islamic banking bulletin issued by the State Bank of Pakistan (SBP) stated that the market share of Islamic banking assets inched up 11.7 percent in January-March 2017, compared with 11.4 percent a year earlier.

“The increase in assets was mainly contributed by financing that witnessed growth of 12.4 percent during the quarter under review,” the SBP said. “However, investments of Islamic banks registered a decline of 0.3 percent,” it added.    

The slowdown in investments can be linked with the fact that no sovereign domestic Sukuk has been issued since March 2016.   Financing to deposits ratio of the Islamic banks were recorded at 59 percent by end March 2017, compared with 52 percent in the corresponding period of last year.

It is pertinent to mention that the banking industry’s overall advances to deposits ratio stood at 47.5 percent. Likewise previous quarters, Diminishing Musharaka remained the leading mode for financing followed by Murabaha and Musharaka.

In terms of sector-wise financing, production and transmission of energy and textile remained leading sectors and their share in overall financing of IBI recorded at 15.4 percent and 13.2 percent, respectively by end March. Breakup of segment-wise financing revealed that corporate sector accounts for 74.8 percent share in overall financing of IBI followed by consumer financing having 10.3 percent share.

Financing extended by IBI to small and medium enterprises and agriculture remained lower compared to overall banking industry’s averages. The SBP’s report showed that deposits of Islamic banks increased 17.1 percent year-on-year in January-March 2017. Deposits at Islamic banks were at Rs1.564 trillion against Rs1.336 trillion by end March 2016.   The market share of Islamic banks’ deposits rose to 13.2 percent from 12.9 percent a year ago.