Financial analysis of Islamic Banking in Pakistan.

Byline: S. Kamal Hayder Kazmi

Researchers reported that Islamic banking is now approximately 30-years old. In 1963, Islamic banking was started in Egypt; most of the biography corroborates but most of the countries within the Globe agreed and developed Islamic banking in their countries during 70s and 80s. Among all classes of the society wealth or income should be equally divided Islam believes and wealth shouldn't stick with the rich only. In the World, being one of the most developing Muslim nations, State Bank of Pakistan (SBP) has been encouraging and getting the infrastructure for the development of Islamic Banking System in Pakistan.

The Islamic banking however is still comparatively in the infancy stage in the country as against to the further organized commercial banking sector. To complete regulatory requirements of SBP in the country various leading conventional banks have organized Islamic banking windows parallel to the commercial banking system.

There is much other governance in the Islamic banking industry to be put in place to promote the trust and self-assurance to strengthen the risk management by the Shariah principles and framework. Islamic banking products like Murabaha and Mudarabah have drawn substantial attention from Pakistani religious people. Worldwide, Mudarabah and Murabaha products are among the fastest growing Islamic finance instruments.

Islamic Financing Mix (% Share)

Mode###18-Sep 19-Jun 19-Sep

Murabaha###12.8###13.5###13

Ijarah###6.6###6.1###6.1

Musharaka###21.5###20###20

Diminishing Musharaka###33.4###33.6###35

Salam###2.3###2.6###2.3

Istisna###7.6###8.9###8.7

Others###15.8###15.3###14.9

Total###100###100###100

Asset and liability structure

Statistics revealed by the State Bank of Pakistan that assets of Islamic banking industry rose by Rs. 3 billion during the quarter July to September, 2019 and were registered at Rs. 2,995 billion as against to Rs. 2,992 billion in the last quarter. Market share of Islamic banking industry's assets in overall banking industry's assets was also registered at 13.8 percent by end September, 2019. The share of financing and investments (net) in total assets of Islamic banking industry reached at 51.6 percent and 19.9 percent, respectively by end September, 2019.

Investments

Moreover, SBP also showed that Investments (net) of Islamic banking industry were registered at Rs. 595 billion by end September, 2019 as against to Rs. 606 billion in the last quarter. During the period...