KARACHI: The overall assets and deposits of the Islamic banking industry have shown tremendous growth of 30 per cent and 27.8 per cent respectively during 2020, the State Bank of Pakistan (SBP) said in its report. It added that this is the highest increase in assets in a year since 2012 and in deposits since 2015.
Over the last five years, both assets and deposits of the Islamic banking industry have more than doubled.
The SBP reported this today in its quarterly report, Islamic Banking Bulletin, for the quarter ending December 31, 2020. This growth in assets and deposits of the Islamic banking industry is encouraging, particularly considering that the industry faced COVID-19 related challenges during 2020.
SBP has been playing a pivotal role in the promotion and development of Islamic banking in the country. Due to the continuous efforts of SBP and relevant stakeholders, the Islamic banking industry has been growing consistently over the years, which is reflected in the sizeable market share it has acquired in the overall banking industry. The assets of the Islamic banking industry increased to Rs 4269 billion, whereas deposits reached Rs 3389 billion by the end of December 2020. There has been a 17 per cent increase in assets and an 18.3 per cent increase in deposits of the overall banking industry.
Financing of the Islamic banking industry has also grown by 16 per cent during CY20. Further, the non-performing finances (NPFs) to financing (gross) ratio has declined from 4.3 percent, at the end of December 2019, to 3.2 per cent at the end of December 2020.
SBP is amongst the few regulators who have introduced a comprehensive legal, regulatory, and Shariah governance framework for the Islamic banking industry in the country. Some of the major steps introduced by SBP include strengthening of the Shariah governance framework, ensuring availability of Shariah-compliant refinance facilities, detailed guidelines to facilitate the industry during COVID-19 for rescheduling and restructuring of financing facilities according to Shariah principles, standardisation of Islamic banking practices in line with best international practices, issuance of instructions for enhancing the scope of Islamic banking windows operations, and the issuance of guidelines for conversion of a conventional bank into an Islamic bank.
SBP has also played a key role in the development of the Shariah structure for Naya Pakistan Certificate, i.e. Islamic Naya Pakistan Certificate (INPC). INPCs are available through the Roshan Digital Account for investment to the overseas Pakistanis and those resident Pakistanis who have declared assets abroad. Moreover, extensive efforts have been made in close collaboration and coordination with the stakeholders for capacity building and awareness creation about Islamic banking across the country. In this respect, SBP’s key initiative for establishment of three centers of excellence in Islamic finance education at well renowned business schools i.e. IBA Karachi, LUMS Lahore and IMS Sciences in Peshawar was a timely decision These centers are now contributing not only on the research and awareness related areas, but simultaneously helping the industry in provision of the Islamic banking experts.
In continuation of its on-going strategy, SBP remains committed to the promotion of the Islamic banking industry on a sound and sustainable basis in the country by providing a level playing field. In recognition of its efforts for the development of the Islamic banking industry, SBP was also voted as the best central bank in promoting Islamic finance for 2020 by a poll conducted by Islamic Finance News (IFN), REDmoney Group Malaysia. SBP has also won this award in 2015, 2017, and 2018. Moreover, Global Islamic Finance Award (GIFA) has awarded the “Best Central Bank of the Year 2020” title to SBP in 2020.