Islamic banking assets increase 32pc to Rs4.79trln in April-June

KARACHI: Assets of the Islamic banking industry (IBI) increased by 32 percent to Rs4.79 trillion in the second quarter of 2021 from Rs3.63 trillion a year ago, the central bank said on Friday.

The Islamic banking sector deposits stood at Rs3.82 trillion in April-June 2021, compared with Rs2.94 trillion in the same period last year, said the State Bank of Pakistan’s Islamic Banking Bulletin. The deposits saw year-on-year growth of 29.7 percent.

The market share of Islamic banking assets and deposits in the overall banking industry rose to 17 percent from 15.3 percent. The market share of Islamic banks’ deposits rose to 18.7 percent from 16.9 percent.

By the end of June 2021, the IBI network consisted of 22 Islamic Banking Institutions including five full-fledged Islamic banks and 17 conventional banks, having standalone Islamic banking branches. During the quarter under review, 79 branches were added to a branch network of IBI.

As a result, the branch network increased to 3,583 branches (spread across 124 districts of the country) by the end-June, 2021. The branch network is mainly concentrated in Punjab, followed by Sindh and Khyber-Pakhtunkhwa, respectively.

Net investments of IBI registered a growth of Rs17.6 billion during the period under review and were recorded at Rs1.36 trillion, the SBP’s bulletin said.

During the period under review, the government issued one domestic Ijarah Sukuk amounting to Rs28.9 billion, it added.

The profit before tax of IBI fell to Rs42.6 billion in April-June 2021 from Rs49 billion a year ago.

Earnings ratios, like return on assets and return on equity (before tax), were recorded at 1.9 percent and 31.1 percent, respectively.

Operating expense to gross income of IBI was slightly increased and recorded at 52.3 percent by the end of June 2021 compared to 51.5 percent in the previous quarter.

Net financing and related assets of IBI were augmented by Rs165 billion to reach Rs2.11 trillion.

In terms of the mode wise breakup of financing (gross), the share of Diminishing Musharakah (35.0 percent) remained highest in the overall financing of IBI, followed by Musharakah (21.4 percent) and Murabaha (15.3 percent).

The review of the sector-wise financing showed that a major portion of the financing of IBI was extended to textile (13.9 percent) and production and transmission of energy (13.6 percent) sectors. However, this was in line with the overall trend in the banking industry.

Client-wise financing remained concentrated in the corporate sector, having a share of 68.8 percent in the overall financing of IBI, followed by commodity financing and consumer financing with a share of 15.2 percent and 10.6 percent, respectively.

The share of SMEs and agriculture financing in the overall financing of IBI was recorded at 2.6 percent and 1.2 percent.