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In the third quarter of 2023, Pakistan’s Islamic banking industry experienced substantial growth, registering an impressive increase of nearly 22%, and achieving a historic milestone with total assets reaching Rs8.417 trillion.
As per the Islamic Banking Bulletin released by the State Bank of Pakistan (SBP), the deposits within the Islamic banking sector surpassed Rs6.160 trillion by the end of September, marking a notable escalation from Rs5.021 trillion in the corresponding period of the previous year.
During the July-September 2023 period, the market share of assets and deposits in the overall banking sector for Islamic banking stood at 19.6% and 22.5%, respectively.
The surge in quarterly assets was primarily fueled by a rise in net investments, which increased by Rs456 billion, reaching a total of Rs3.928 trillion by the end of September 2023, as per the SBP’s report.
Conversely, net financing for the Islamic banking industry was recorded at Rs3.026 trillion, with the share of net investments and net financing in the total assets of the Islamic banking industry standing at 46.7% and 35.9%, respectively.
The growth in net investments was attributed to the industry’s investments in the Government of Pakistan’s domestic Ijarah Sukuk (GIS).
With the world’s fifth-largest population and the second-largest Muslim population, Pakistan is witnessing a growing demand for Shariah-compliant banking services. A recent study conducted by the SBP in collaboration with the Department for International Development (DFID) revealed that religious beliefs contribute to 23% of the demand for Islamic banking, with a higher demand observed among households (retail) than businesses.
Aligning with its strategic vision for 2023–2028, the SBP aims to convert existing conventional banks into Islamic financial institutions. This initiative involves creating a roadmap for the transition to Islamic banking and collaborating with banks for the conversion.
A significant milestone for the Islamic banking sector was set by the Federal Shariat Court’s historic ruling, mandating compliance with Shariah in Pakistan’s banking sector by 2027.
Read More: Dusk News Business