Pakistan Islamic Banking stays on the growing path.

Byline: S. Kamal Hayder Kazmi

International experts identified that the international trade has historically grown much faster than worldwide Gross Domestic Product (GDP), nearly doubling in the 20 years prior to the pandemic and representing 60 percent of worldwide GDP. Although the pandemic led to a fall in the worldwide trade of 9.2 percent during 2020, the setback is predicted to be temporary, with continued growth forecasted for 2021 and beyond (WTO). It is also predicted that 47 percent of worldwide trade relies on bank-intermediated trade finance. As worldwide trade enlarges, trade finance is of central significance. During 2019, the worldwide trade finance market worth to US$8.94 trillion. Because of Covid-19, the worldwide trade finance market dropped through 14.83 percent during 2020 to US$7.62 trillion but is predicted to recover and reach US$10.43 trillion by the end of 2026, growing at a rate of 5.37 percent yearly from 2020-2026.

They also identified that the worldwide size of the Islamic Trade Finance (ITF) currency at US$186 billion, less than 5 percent of total predicted trade finance activities by OIC member countries and a small fraction of global statistics. ITF is, however, growing both in scale and in relevance as Islamic finance plays a larger role in OIC countries.

Statistics showed that the Islamic Trade Finance Corporation (ITFC) has approved US$5.8 billion in 2019. In the developing countries like Pakistan, according to the State Bank of Pakistan (SBP), assets of Islamic Banking Industry (IBI) in Pakistan enlarged by Rs 408 billion during the quarter April to June, 2021 and reached at Rs 4,797 billion by end June, 2021. Deposits of IBI also recorded a quarterly growth of Rs 365 billion and were witnessed at Rs 3,822 billion. The Year on Year (YoY) growth of assets and deposits of IBI was registered at 32.0 percent and 29.7 percent, respectively by end June 30, 2021. This has been the highest YoY growth in assets and deposits since June, 2015. Market share of Islamic banking assets and deposits in the overall banking industry reached at 17.0 percent and 18.7 percent, respectively.

On profitability side, profit before tax of IBI was recorded at Rs 42.6 billion by end of June, 2021.

Historically from its inception in the 2000s, Islamic banking in Pakistan has had a continuous growth journey. There are 5.0 full-fledged Islamic banks and 17 conventional banks with stand-alone Islamic banking branches in Pakistan.

...