KARACHI: The Islamic Banking Industry (IBI) invested 23 per cent more than the deposit growth during Jan-March 2021 (3QFY21) indicating the presence of large liquidity, the State Bank of Pakistan (SBP) said on Friday.

In its quarterly Islamic Banking Bulletin, the SBP noted that deposit base of IBI grew by Rs68 billion during 3QFY21 while investments went up by Rs84bn. Investments (net) of IBI registered an increase of Rs84bn during the period and stood at Rs1,345bn by end of March 2021.

This increase in investments can be mainly attributed to investments made by IBI in government’s domestic Ijarah Sukuk. The government issued two domestic Ijarah Sukuk of Rs75bn during the period, the bulletin added.

Deposit base of IBI grew by Rs68bn during the period and stood at Rs3,457bn by end March, 2021. Market share of IBI’s deposits in overall banking deposits increased to 18.7pc in 3QFY21 compared to 18.3pc in the previous quarter in FY20. The share of Islamic Banks and Islamic Banking Branches in overall deposits of IBI stood at 58.9pc and 41.1pc, respectively, in 3QFY21.

Category wise breakup of deposits showed that saving deposits and current deposits increased by Rs44bn and Rs40bn, respectively; while fixed deposits witnessed a decline of Rs37bn during the period.

Profit-before-tax of IBI was recorded at Rs21.3bn in 3QFY21 compared to Rs20.6bn in the same period in FY20. Operating expense to gross income of IBI was registered at 51.5pc by end March, 2021 compared to 47.5pc in the previous quarter

The SBP reported that the assets of IBI increased by Rs120bn during the quarter and were registered at Rs4389bn, compared to Rs4269bn in the previous quarter. This growth in assets was mainly contributed by investments (net) that reflected a quarterly growth of Rs84bn while financing (net) of IBI, recorded an increase of Rs72bn during the period under review.

Market share of Islamic banking industry’s assets in overall banking industry’s assets was recorded at 17pc by end March, 2021. The share of net financing and investments in total assets (net) of IBI stood at 44.5pc and 30.6pc, respectively.

In terms of sector wise financing, textile and production and transmission of energy sectors were leaders, with their individual share in overall financing of IBI recorded at 14.8pc and 13.8pc, respectively.

Review of client wise financing reveals that corporate sector accounted for 69.7pc share in overall financing of IBI, followed by commodity financing and consumer financing with a share of 14.9pc and 10.5pc, respectively. The share of SMEs and agriculture financing in overall financing of IBI remained low compared to the overall banking industry averages.

Liquid assets to total assets and liquid assets to total deposits ratios stood at 27.8pc and 35.3pc, respectively. Financing to deposits ratio (net) of IBI increased to 56.5pc by end March, 2021 compared to 55.5pc in the previous quarter, mainly due to increase in the financing portfolio of IBI.

Published in Dawn, July 10th, 2021