Islamic Banking Industry Surges to Rs. 9 Trillion Mark
The Islamic Banking Industry (IBI) in Pakistan has achieved a significant milestone, with its total assets reaching Rs. 9 trillion, according to the latest Islamic Banking Bulletin released by the State Bank of Pakistan (SBP). The report highlights a year of remarkable growth and expansion across the sector.
As of December 2023, the assets of the Islamic banking industry stood at Rs. 8.9 trillion, marking a substantial increase from Rs. 7.2 trillion at the end of December 2022. This represents a 24% year-on-year growth in assets. Deposits within the industry also saw a robust 30% rise, reaching Rs. 6.7 trillion by the end of 2023, compared to Rs. 5.1 trillion in the previous year.
The IBI’s share in the overall banking industry has now reached 23%, reflecting the growing preference for Sharia-compliant banking services. The year 2023 has been particularly historic for the industry, with multiple significant achievements.
Meezan Bank, the leading Islamic bank in Pakistan, emerged as the most profitable bank in the country’s banking sector. In a landmark development, Faysal Bank Limited completed its conversion to become the second-largest Islamic bank, marking the largest such transformation of any financial institution globally. Additionally, several commercial banks, including Bank Makramah Limited (formerly Summit Bank) and Zarai Taraqiati Bank, announced plans for complete conversions to Islamic banking.
Investments within the Islamic banking sector also surged, increasing to Rs. 4.2 trillion from Rs. 3 trillion between 2022 and 2023, showcasing a notable growth of 38%. Much of these deposits were invested in Sukuks issued by the government and private sector, ensuring stable margins for the banks’ balance sheets. However, the overall financing from the Islamic banking sector grew by only 7%, rising to Rs. 3.3 trillion by the end of 2023 from Rs. 3.1 trillion at the end of 2022. This modest increase indicates limited financing uptake by the private sector, highlighting a need for greater involvement in the socio-economic development of the country.
The high rate of financing is a primary factor behind the low uptake from the Islamic banking sector. According to the SBP, the IBI’s share in overall financing stood at 27%, despite its significant growth in other areas.
Despite facing challenges such as a shortage of trained human resources, the Islamic banking industry managed to expand its branch network significantly. By the end of 2023, the number of branches had increased to 4,955, surpassing the 5,000 mark in early 2024. In 2023 alone, 559 new branches were added, averaging more than one new branch per day.
Overall, 2023 was a landmark year for Islamic banking in Pakistan, marked by significant growth, major institutional transformations, and a steady expansion of services to meet the increasing demand for Sharia-compliant financial solutions.
