SBP Report: Islamic Banking Sector in Pakistan Sees 30% Growth

This is the highest such increase since 2012.

People wait for their turn to withdraw money outside banks in Islamabad. (AFP/File)

Pakistan’s Islamic banking industry has posted 30% and 27.8% growth in overall assets and deposits, respectively, during 2020.

This is the highest such increase since 2012.

The surge was driven by increasing access to shariah-compliant financial instruments and growing faith-based demand.

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This information was revealed by the State Bank of Pakistan (SBP) on Wednesday in its Islamic Banking Bulletin report for the quarter that ended on the 31st of December, 2020.

Twenty-two Islamic banking institutions currently operate in Pakistan: five Islamic banks and 17 conventional banks with standalone Islamic banking branches.

The overall assets of the industry increased to ₨. 4.3 trillion while deposits reached ₨. 3.4 trillion by the end of December 2020, accounting for 17% of all assets and 18.3% of all deposits of the country’s entire banking industry.

“This is the highest surge in assets in a year since 2012 and in deposits since 2015,” the report stated.

“Over the last five years, both deposits and assets of the Islamic banking industry have more than doubled,” the central bank said.

“This growth in deposits and assets of the Islamic banking industry is encouraging, particularly since the industry was also faced with the COVID-19 pandemic challenges during 2020.”

Financing for the Islamic banking industry also grew by 16% during 2020.

Meanwhile, the non-performing finances (NPFs) to financing (gross) ratio declined from 4.3 % (2019) to 3.2% (2020).

Bankers say the growth in Islamic banking, where under shariah, the payment and receipt of interest are strictly forbidden, is driven main due to increasing access.

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