KARACHI: The overall assets and deposits of the Islamic Banking Industry (IBI) have grown 30 per cent and 27.8pc, respectively, during the calendar year 2020, the State Bank of Pakistan (SBP) reported on Wednesday.

The Islamic Banking Bulletin for the quarter ending December 31, 2020 said it was 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 IBI have more than doubled. The report said that the SBP has been playing a pivotal role in the promotion and development of Islamic banking.

“The assets of Islamic banking industry increased to Rs4,269 billion, whereas deposits reached Rs3,389bn by end December 2020 making 17pc in assets and 18.3pc in deposits of the overall banking industry,” the bulletin said.

“This growth is encouraging, particularly due the fact that the IBI was also faced with the Covid-19 pandemic challenges during 2020,” remarked the SBP.

Financing of the Islamic banking industry has also grown by 16pc during CY20. Further, non-performing finances (NPFs) to financing (gross) ratio has declined to 3.2pc from 4.3pc on Dec 31 2019.

Profit before tax of IBI jumped 33.7pc to Rs88.4bn during the quarter ended Dec 31, 2020 from Rs66.1bn in the same period 2019. The return on assets and return on equity before tax stood at 2.4pc and 36.4pc, respectively. During the period under review, operating expense to gross income of IBI was recorded at 47.5pc.

The SBP is among the few regulators which have introduced a comprehensive legal, regulatory and Shariah governance framework for Islamic banking industry.

Some of the major steps and measures taken by SBP during the last few years for the growth of Islamic banking included 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 issuance of guidelines for conversion of a conventional bank into an Islamic bank.

The SBP has also played a key role in the development of the Shariah structure for Naya Pakistan Certificate ie Islamic Naya Pakistan Certificate. INPC’s are available through the Roshan Digital Account for investment to the overseas Pakistanis and those resident Pakistanis who have declared assets abroad.

Published in Dawn, March 25th, 2021

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