ISLAMABAD - The Islamic Banking Industry (IBI) continued its growth momentum and witnessed 16.6 percent expansion in assets while its deposits increased by 17.7 percent during the fiscal year 2017, according to latest official data.

During the fiscal year 2017, the IBI assets reached to Rs2,035 billion while the deposits of the industry touched Rs1,720 billion figure, according to State Bank of Pakistan (SBP) data. “During FY17, the IBI continued its growth momentum, recording improvement in all key performance indicators,” the report said. The IBI share in overall banking assets and deposits also increased from 11.4 percent and 13.2 percent during the fiscal year 2016 to 11.6 percent and 13.7 percent respectively during FY2017.

The IBA also witnessed improvement in the financing to deposit ratio (FDR) as these stood at 56.8 percent markedly surpassing the FDR of conventional banking industry, which stood at 48.7 percent as at end June 2017. This points to more focus of Islamic banking institutions on core banking business as compared to their conventional counterparts, the report said adding that the growth of the industry and its growing market share in overall banking industry seemed promising in view of its shorter history as compared to the long established conventional banking.

In terms of outreach, the Islamic banking industry had further strengthened its presence across the country, it added. During the year, 21 Islamic banking institutions (5 full-fledged Islamic banks and 16 conventional banks having Islamic banking branches) were operating in the country. During the period under review, Burj Bank Limited was merged into AlBaraka Bank (Pakistan) Limited, owing to which the number of IBIs adjusted at 21. Branch network of IBI reached to 2,320 branches spread across 110 districts of the country as of June 30, 2017.

The consistent positive growth of the Islamic banking industry among others could also be attributed to the supportive policy and regulatory environment being promoted by SBP. The SBP efforts and initiatives for promotion and growth of Islamic banking had national and international recognition, it added. The government has taken many initiatives to promote Islamic banking it said adding that the initiatives included formulation of a high-level Steering Committee which had submitted its report on promotion of Islamic Banking.

To encourage participatory modes of financing, the Islamic banking institutions (IBIs), during the year were exempted from the requirement of using KIBOR as benchmark rate on Musharakah, Mudarabah and Wakalah (Agency) based financing.

The SBP is actively engaged in awareness creation among masses and capacity building of the industry. During FY17, SBP in collaboration with various reputed national and international institutions arranged several seminars, training programs and workshops on Islamic banking.