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Cheerful Islamic Banking by March 2019

According to the State Bank of Pakistan (SBP) statistics the Investments (net) of Islamic banking industry rose by 19.9 percent and were registered at Rs. 617 billion by end March, 2019 as against to Rs. 515 billion in the last quarter. During the period under review, investments (net) of Islamic banks (IBs) reached at Rs. 376 billion while the same was registered at Rs. 241 billion for Islamic banking branches (IBBs). Furthermore, financing and related assets (net) of Islamic banking industry rose by Rs. 14 billion to reach Rs. 1,525 billion by end March, 2019 as against to Rs. 1,511 billion in the last quarter; financing and related assets (net) of IBs reached at Rs. 904 billion while the same was recorded at Rs. 621 billion for IBBs.

In terms of mode wise financing, Diminishing Musharaka retained the highest share (32.9 percent) in overall financing of Islamic banking industry followed by Musharaka (19.7 percent). Statistics also showed that in terms of sector wise financing, production & transmission of energy and textile sectors remained two leading sectors and their share in overall financing of Islamic banking industry was registered at 16.9 percent and 12.2 percent, respectively by end March, 2019.

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Presently, economists of Pakistan recorded that the overall macroeconomic condition of Pakistan remained challenging towards the end of FY2018. Twin deficits on fiscal and external front, emerging inflationary pressure and excessive aggregate demand contributed challenges for the economy. The Government of Pakistan has started homegrown macroeconomic stabilization program. The thrust of stabilization attempts is on monetary and fiscal tightening to control aggregate demand and inflation targeting. This allowed State Bank of Pakistan to take a cautionary stance on changing the policy direction through growing the policy rate by a cumulative 650 bps since January, 2018. They have also urged that economy is responding to stabilization measure on external front but near term challenges suggests more macroeconomic adjustments for some time. Efficacy of monetary policy required prudent fiscal management, balance of payment support in coming years. According to SBP, asset quality indicators of Islamic banking industry including non-performing finances (NPFs) to financing (gross) and net NPFs to net financing showed further improvement from last quarter and were recorded at 2.3 percent and 0.3 percent, respectively by end March, 2019; both these ratios were better than those of overall banking industry’s averages.

 

Deposits of Islamic banking industry during the period under review were registered at Rs. 2,199 billion and their share in overall banking industry’s deposits rose to 15.6 percent by end March, 2019. The category wise breakup of deposits during the quarter explain that fixed deposits and current (non-remunerative) deposits fell 3.8 percent (Rs. 18 billion) and 2 percent (Rs. 15 billion respectively while saving deposits and current deposits (remunerative) recorded growth of 4.5 percent (Rs. 37 billion) and 50.7 percent (Rs. 4 billion) respectively; current deposits (remunerative constituted only 1 percent of overall deposits of Islamic banking industry.

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According to SBP the review of client wise financing reveals that corporate sector accounted for 74.5 percent share in overall financing of Islamic banking industry, followed by consumer financing with a share of 10.4 percent and commodity financing with a share of 9.9 percent. The share SMEs financing and agriculture financing in overall financing of Islamic banking industry were registered at 3.6 percent and 0.4 percent, respectively. Statistics analysis also showed that the network of Islamic banking industry comprised of 22 Islamic banking institutions; 5 full-fledged Islamic banks (IBs) and 17 conventional banks having standalone IBBs by end March, 2019. Branch network of Islamic banking industry was registered at 2,869 by end March, 2019; Punjab and Sindh together constituted more than 77 percent share in overall branch network of the industry . The number of Islamic banking windows operated by IBBs stood at 1,284.

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