Govt promotes Islamic banking as part of financial inclusion
Net investments of the Islamic banking industry registered an increase of Rs84b during the period under review and stood at Rs1.35tr by the end of Mar 2021. PHOTO: FILE
Pakistan has the second-largest Muslim population in the world with very low banking penetration. The government seeks to increase financial inclusion by promoting Islamic finance as part of the National Financial Inclusion Strategy.
The State Bank of Pakistan’s (SBP) BSC Islamabad office organised an awareness session in the Federal Urdu University of Sciences and Technology on Wednesday to create awareness regarding Islamic Banking.
Meezan Bank Senior Research Scholar, Zulqurnain Haider, delivered a comprehensive lecture on the social topic and effectively answered students’ questions regarding Islamic banking.
The size of the Pakistani Islamic finance industry is estimated to have crossed $42 billion at the end of 1Q22.
Islamic banks are the largest contributor to the Islamic finance industry at 67% (total assets), followed by Sukuk at 26% (outstanding amount), Islamic funds at 6% (total assets) and takaful at 1% (total contributions).
In recent years, the Islamic finance industry has witnessed a stellar growth spurt. Despite the pandemic, Islamic financing expanded at an average compound rate of 10.5% in 2020 and 2021, while conventional loan growth extended by 3.4% during the same period.
At the end of 2021, the Islamic banking share reached 18.6% of the banking sector’s assets compared to 12.4% at the end of 2017 and 19.4% of deposits compared to 14.5% at the end of 2017: 14.5%
The SBP is now targeting the Islamic banking sector to contribute 30% to the overall banking industry assets and deposits by 2025. In 2021, the Islamic banks’ total assets experienced a sharp growth of 30.6% year-on-year to Rs5,577 billion. Islamic branches of conventional banks contributed significantly, with a 45.7% share of overall Islamic banking assets by the end 2021.
Published in The Express Tribune, September 29th, 2022.
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