Islamic Bank Industry (IBI) continued to expand in the country with a handsome double-digit growth of 35 percent in the industry in the outgoing year of 2017.
According to the State Bank of Pakistan (SBP), the profit before tax made by Islamic Banking Industry increased to Rs. 23 billion in 2017, as compared with Rs. 17 billion recorded in 2016.
On the other hand, banking industry of conventional banks recorded a negative growth of 21 percent in the same year. The overall profit before tax of conventional banks decreased to Rs. 243.8 billion in 2017 from Rs. 311.8 billion in 2016.
Islamic Banking Industry has been rising at a good pace in Pakistan. Not only have the banks’ balance sheets improved but Sharia-compliant services and products are being gradually accepted by the masses.
The network of Islamic banking industry consisted of 21 Islamic banking institutions; 5 full-fledged Islamic banks and 16 conventional banks with Islamic banking branches by December 2017.
The assets of Islamic banking industry grew to Rs. 2.272 trillion by the end of 2017. Deposits surged to Rs. 1.729 trillion and the values of its financing for assets increased to Rs. 1.207 trillion by the end of the outgoing year.
The constant growth in major heads of balance sheets of Islamic banks also improved the market share of Islamic Banking Industry in the overall banking industry. The market share of Islamic banking assets and deposits in the overall banking industry increased to 12.4 percent and 14.5 percent respectively by December 2017
Banking Industry Profit Decline By 17%
The entire banking industry, including conventional and Islamic banks, saw a decline of 17 percent in 2017 on a year-on-year basis.
According to SBP’s statistics, the profit after tax of the banking industry decreased to Rs. 157.8 billion in 2017 as against Rs. 189.9 billion recorded in 2016.
The profitability of the banking industry has continued to go down for the past two years mainly on the lower policy rates which reduced the margins of conventional banks and ultimately eroded the earnings.
In 2016, the banking industry also saw a decline in profitability but it stood at 4.5 percent. The industry profit decreased to Rs. 189.9 billion in 2016, down from Rs. 199 billion recorded in 2015.