Over the last one decade,
Reportedly, State Bank of
Last year, the SBP launched a billion rupee advertising campaign for creating awareness about the ‘benefits of Islamic banking’. However, most of the experts strongly believe that placement of advertisements in selected newspapers failed in attracting attention of masses, which still have some serious reservations about the system. On top of that Islamic banking is confined to corporate sector and in less than half a dozen megacities. This is not merely an expression but an admission by the central bank in its review of Islamic banking for July-
Client category wise financing of IBIs has also remained concentrated in corporate sector, having a share of nearly 70 percent followed by consumer financing (13.2%), commodity financing (11.3%) and SME (4.1%) in overall financing. It is important to note that relatively lower level of financing extended by Islamic banking in categories such as SMEs and agriculture is in line with the trend of overall banking industry indicating limited outreach of banking sector in the sectors.
The central bank has bifurcated banks undertaking Islamic banking into two categories: 1) full-fledged Islamic Banks (IBs) and 2) Islamic Banking Divisions (IBDs) of conventional banks. As regards share of these two categories, assets of IBs constitute 64 percent in overall assets of Islamic banking industry with remaining 36 percent assets being contributed by IBDs. SBP quarterly report reveals that assets of both IBs and IBDs witnessed positive growth compared to previous quarter but IBs recorded relatively better growth (2.7%) as compared to IBDs (2.3%).
According to the report there are total 1,161 branches in the country that offer Islamic banking. Out of these IBs have 696 branches, IBDs had 397 branches and 68 branches have been termed sub bank branches (out of these 53 belong to
One of the suggestions is that the central bank should grant more permission to establish at least two more full service Shariah compliant commercial banks. Since NBP has a very strong capital base, largest network of branches and strong presence in rural areas, it should be granted permission to establish a full service Islamic bank. It would be more appropriate if NBP joins hand with one of the leading Islamic banks from
It is often said that limited number of branches is a serious impediment in the growth of Islamic banking in
It may not be wrong to say that liquidity management remains a serious constraint. An option is available in the form of Sovereign Ijara Sukuk. Since introduction of these products, Islamic banks have started accepting more deposits. Analysts suggest that Sukuks should also be floated for arranging funds for the power sector. However, unless ‘circular debt’ issue is not resolved, no investor will be keen in investing Sukuks floated by the companies involved in power generation and distribution.
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