At the end of September 2020, State Bank of Pakistan (SBP) identified that the infrastructure of Islamic banking industry remained same with 22 Islamic banking institutions (IBIs); 5 full-fledged Islamic banks (IBs) and 17 conventional banks having standalone Islamic banking branches (IBBs) in Pakistan. However, the branch network of IBI saw a quarterly raise from 3,274 branches to 3,303 branches. Statistics identified that branches are concentrated in Punjab, followed by Sindh and Khyber Pakhtunkhwa (KPK). The number of Islamic banking windows was operated through conventional banks having IBBs reached at 1,386. Assets of IBI grew from Rs 3,633 billion by end June 2020 to Rs 3,809 billion by end September 2020, primarily because of investments. It was a considerable raise of Rs 176 billion as against to a minor raise of Rs 2.9 billion during the same period of last year 2019. Following the usual trend, financing & investments (net) constituted the major share (72.5 percent) in total assets of IBI by close of September 2020, though lower than that of overall banking industry’s share of 81.4 percent. The share of Financing and Investments (net) in total assets of IBI was 44.4 percent and 28.1 percent, respectively. Statistics also identified that at the end of September 2020, assets of IBs witnessed a notable increase of 4.7 percent (Rs 100.7 billion) to Rs 2,235.9 billion from Rs 2,135.3 billion by end June 2020. Moreover, assets of IBBs witnessed a surge of 5 percent to Rs 1,572.9 billion. Further, the share of IBs and IBBs in overall assets of IBI reached at 58.7 percent and 41.3 percent, respectively.
At the end of September 2020, investments (net) made by IBI surged considerably to the tune of 19 percent and reached at Rs 1070.1 billion as against to a deceleration of 1.9 percent in same period of 2019. This raise was mostly because of investments made by IBIs in GoP Sukuk; during the period under review GoP has issued sovereign Sukuk of Rs 162 billion. An analysis of investments made by IBs & IBBs revealed that Investments (net) made by IBBs witnessed a growth of 22 percent, which was larger than the growth of 16.4 percent (Rs 79.8 billion) made by IBs.
According to SBP report, at the end of September 2020, financing & related assets (net) of IBI reached at Rs 1,689.8 billion. Breakup of the data between IBs and IBBs revealed that financing & related assets (net) of IBs saw a quarterly rise of 0.9 percent to reach to Rs 972.6 billion. On the other hand, financing & related assets (net) of IBBs experienced a fall of 2.3 percent (Rs 16.8 billion) and reached at Rs 717.3 billion. In terms of mode wise financing, following the usual trend, the share of Diminishing Musharakah remained the highest in overall financing of IBI with a share of 34.5 percent, followed by Musharaka (23.5 percent) and Murabaha (13.3 percent).
In terms of sector wise financing, ‘production & transmission of energy’ retained its leading position during the quarter under review with a share of 15.6 percent in overall financing of IBI, followed by textile (14.3 percent) and individuals (10.2 percent) by end September 2020. Review of client wise financing revealed that corporate sector had the important share i.e. 72.1 percent in overall financing of IBI, followed through commodity financing and consumer financing with a share of 13.4 percent and 9.9 percent, respectively. Asset quality indicators of IBI; ‘Non-performing financing (NPFs) to financing (gross)’ and ‘Net NPFs to net financing’ marginally increased from 3.3 percent and 0.7 percent by end June 2020 to 3.7 and 0.9 percent, respectively by close September 2020, owing to a meagre raise in NPFs. Non-performing ratio of IBI (3.7 percent) is well below than the overall banking industry ratio of 9.9 percent. Deposit base of IBI witnessed a quarterly increase of 3 percent (Rs 87.5 billion) to Rs 3,033.5 billion by end September 2020, higher than the growth in deposit base of overall banking industry, which saw an increase of 0.8 percent during the period under review.
Statistics also showed that the category wise breakup of deposits showed that all categories of deposits witnessed growth on quarterly basis with the exception of fixed deposits and others. Saving deposits enhanced by 7.1 percent (Rs 76.6 billion) while ‘current deposits’ by 2 percent (Rs 20.2 billion). At the end of September 2020, deposits of IBs grew by 3 percent (Rs 53.7 billion) to stand to Rs 1,815.6 billion. Likewise, deposits of IBBs experienced a growth of 2.9 percent (Rs 33.8 billion) and reached at Rs 1,217.9 billion. Accordingly, the share of IBs in overall deposits of IBI saw a slight raise from 59.8 percent to 59.9 percent, whereas share of IBBs saw a meagre decline from 40.2 percent to 40.1 percent.
At the end of September 2020, IBI’s ‘liquid assets to total assets’ and ‘liquid assets to total deposits’ experienced a quarterly growth and reached at 24.8 percent and 31.2 percent, respectively. Further, financing to deposits ratio (FDR) of IBI reached at 55.7 percent, larger than the FDR (45 percent) of the overall banking industry. SBP also reported that the ratios of ‘capital to total assets’ and ‘capital minus net NPAs to total assets’ of IBI were registered at 6.8 percent and 6.3 percent, respectively by end September 2020, lower than the respective ratios of the overall banking industry, which were registered at 7.5 percent and 7 percent, respectively.