Islamic Banking Industry Assets Touch Rs. 9 Trillion in 2023

With consistent growth and expansion on all fronts, the Islamic Banking Industry (IBI) has surged to Rs. 9 trillion.

According to the Islamic Banking Bulletin released by the State Bank of Pakistan (SBP), the assets of the Islamic banking industry reached Rs. 8.9 trillion by the end of December 2023 as compared to Rs. 7.2 trillion reported by the end of December 2022, showing an increase of 24 percent.

On the other hand, the deposits of the banking industry also grew by 30% to Rs. 6.7 trillion by the end of 2023 as compared to the previous year’s numbers stood at Rs. 5.1 trillion.

Islamic banking Industry’s share in the overall industry stood at 23%. 2023 had been a historical year for Islamic banking with multiple achievements witnessed by the industry. The leading Islamic bank Meezan Bank became the most profitable bank in the banking industry.

Faysal Bank Limited accomplished its conversion to become the second biggest Islamic banking—the largest conversion of any financial institution in the world. A couple of commercial banks also announced their plans for overall conversions such as Bank Makramah Limited (formerly Summit Bank) and Zarai Taraqiati Bank.

Investments in Islamic banking also increased to Rs. 4.2 trillion from Rs. 3 trillion from the period of 2022 to 23, showing the highest increase in growth of 38 percent. The industry parked the deposits of their customers in Sukuks issued by the government and private sector, making guaranteed margins for its balance sheet. The overall share of IBI stood at 16 percent in the overall financing of the banking industry.

Unfortunately, the financing of Islamic banking reported a mere increase of 7 percent. It increased merely to Rs. 3.3 trillion by 2023-end from Rs. 3.1 trillion by 2022-end. It means the financing availed by the private sector to grow their business is very limited as the role of Islamic banking to overall socio-economic development in the country.

The high rate of financing is the main reason for the low uptake of financing from the Islamic banking industry. According to the SBP, the overall share of IBI in financing stood at 27 as compared to the overall industry’s size.

Despite the shortage of trained human resources, the industry managed to increase its branch network to 4,955 by 2023-end—the number which must have crossed the mark of 5,000 up till now. In 2023, 559 branches were added to the network which means more than one branch was opened every single day, last year.

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