Islamic Banks Grasp 6.1% Market Share

[Abu Zolfiqar]

KARACHI: Islamic banking institutions have improved their market share in the country’s banking industry despite prevailing of a depressive economic situation.

The State Bank of Pakistan in its recent report noted that Islamic banking continued to flourish and increased its share in banking system to 6.1 per cent at the end of June 2010 from 5.1 per cent in June 2009.

The Islamic banking witnessed a double digit growth in assets during the second quarter (May-June) 2010 despite the fact that a couple of Islamic banks went through consolidation phase affecting the Islamic banking activities,” said the report.

Disaggregated analysis of the assets showed seven per cent growth in investments over the first quarter (January-March 2010). The growth mainly resulted from investments in energy sector Sukuks and in foreign Sukuks.

Other assets also underwent a significant increase of 39 per cent due to placement of some of the disbursements as advance against financing under this head due to accounting treatment. Once the products are materialised, these amounts will be moved to financing.

On liabilities side, deposits remained the key source of Islamic banking institutions (IBIs) funding which increased by 14.1 per cent (YoY growth 38.4 per cent).

Islamic banks dominated the rise in deposits increasing their share to around 70 per cent of the total deposits of Islamic banking, said the report.

Financing saw a modest increase. The break-up of financing show that Murabaha, the major source of financing, increased by 19 per cent, while Musharaka financing doubled over the quarter. Salam and Istisna after seeing staggering growth in previous quarter, declined considerably during the 2nd quarter.

The segment-wise analysis indicates an overall decrease in corporate sector financing. However, increase in commodity financing under Murabaha mode for wheat procurement, lead to overall increase in financing.

The increase in auto loans (under Ijarah), coupled with marginal increase in other personal loans and a decrease in mortgage loans (under diminishing Musharaka) led to a marginal increase in consumer financing portfolio of Islamic banks.

Strong growth in deposits with minor increase in financing led to further decline in financing to deposit ratio indicating improved liquidity profile of IBIs.

The financing risk remained subdued. NPFs (non-performing finances) actually declined by 10.9 per cent during the 2nd quarter.

Improved recoveries with increase in value of equity securities held as collateral against the financing decreased the NPFs during the quarter.

DAWN.COM | Business | Islamic banks grasp 6.1 per cent market share

 

[greatsequence]

Islamic Banking is not just increasing its size in Islamic Countries but also in the west. Few intresting Articles.

The Rise of Islamic Banking in a Time of Economic Crisis - US News and World Report

Islamic Banking and Finance in the United Kingdom ? The Recipe for Success - GBLP in the Press - News & Press - Goltsblat BLP

And in Japan

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