Pakistan’s Islamic Banking Industry (IBI) has achieved a remarkable milestone, reaching Rs. 9 trillion in total assets, according to the State Bank of Pakistan’s (SBP) latest Islamic Banking Bulletin.
This impressive growth comes after a surge from Rs. 7.2 trillion in December 2022, reflecting a significant 24% increase. Deposits within the Islamic banking sector mirrored this growth, reaching Rs. 6.7 trillion by year-end 2023, up from Rs. 5.1 trillion – a 30% increase.
The Islamic banking sector now holds a substantial 23% share of Pakistan’s overall banking industry, solidifying its significant contribution to the nation’s financial landscape. 2023 marked a banner year for Islamic banking with several key achievements. Meezan Bank emerged as the industry leader in profitability, while Faysal Bank’s successful conversion solidified its position as the second-largest Islamic bank, marking one of the biggest conversions globally. Further bolstering growth, other commercial banks have announced plans for full conversions to Islamic banking.
Investments within the industry also saw a notable rise, reaching Rs. 4.2 trillion from Rs. 3 trillion – a remarkable 38% increase. Strategic utilization of customer deposits saw investments flow into government and private sector Sukuks, ensuring guaranteed returns for Islamic banks’ balance sheets.
However, the financing aspect of Islamic banking witnessed a slower growth rate of 7%, reaching Rs. 3.3 trillion by 2023’s end compared to Rs. 3.1 trillion in 2022. This highlights a limited uptake of financing by the private sector, likely due to higher financing rates within the Islamic banking framework.
Despite challenges like a skilled workforce shortage, the industry significantly expanded its branch network, reaching 4,955 branches by 2023’s close, likely surpassing the 5,000 mark by now. Notably, 559 branches were added in 2023 alone, showcasing the industry’s commitment to expanding its reach and accessibility nationwide.