Assignment

Q: Discuss the progress and growth of Islamic

banking sector in Pakistan?
Introduction:-
State banks of Pakistan are playing very important
role in the development of Islamic banking and make
Islamic banking as the first priority in the banking
system.
Islamic banking generally shows an increasing
trend in the total assets, total deposits, total
financing, total investment, total no of branches,
profits, earnings per shares, shareholder equity and
other financial indicators which shows the financial
growth and development of the Islamic financial
institutions.
Definition:-
Islamic banking system is a system which is
established on the basis of the philosophy of Islamic
laws (called shariah) and directed by Islamic
economics.
Growth of Islamic banking in Pakistan:-
Islamic banking in the world wide has established
itself and is growing at very fast pace. The Islamic
banking size is expected to reach an estimated USD
1300 billion in the near future. Across the globe
1100 Islamic financial institutions are offering their
services, which are attached with devoted Islamic
academic, legal, regulatory and supervisory
institutions.
Industry progress and Market share:-
Particulars Industry progress YOY Share in overall
Growth (%) banking industry (%)

Jun-17 Mar-18 Jun- Mar- Jun- Jun- Mar- Jun-

18 18 18 17 18 18
Total assets 2035 2334 2482 23.8 21.9 11.6 13.5 12.9
Deposits 1720 1916 2033 22.5 18.2 13.7 14.6 14.8
Islamic 21 21 21 ---- ---- ---- --- ---
banks
Branches 2320 2589 2585 11.7 15.7 ---- --- ---
Region wise Branches:-
Provinces Total number Total number Share Mar- Share Jun-
Mar-18 Jun -18 18 18
Punjab 1239 1278 47.9 47.6
Sindh 750 795 29.0 29.6
KPK 298 300 11.5 11.2
Baluchistan 106 108 4.1 4.0
Federal 135 141 5.2 5.3
capital
AJK 40 42 1.5 1.6
Gilgit 12 12 0.5 0.4
Balistan
FATA 9 9 0.3 0.3
Total 2589 2685 100.0 100.0

Asset Quality Ratio:-

Jun-17 Mar-18 Jun-18 industry
NPF to 3.7 2.8 2.7 7.9
financing(gross)
Net NPF 0.8 0.5 0.4 1.1
Provision to 79.6 82.7 84.4 87.1
NPF
Capital to total 6.6 6.2 6.3 7.1
assets
Net capital to 6.1 6.1 6.1 6.8
total assets
Financing Mix
Jun-17 Mar-18 Jun-18
Murabaha 17.0 13.1 13.4
Ijarah 6.8 6.4 6.6
Musharaka 17.9 21.2 20.0
Diminishing 29.6 32.4 33.7
Musharaka
Salam 5.2 2.5 2.8
Istsina 7.2 7.7 6.4
Others 16.3 16.7 17.1

Conclusion:-
Islamic banks operate under the shariah principles
(Islamic Law) and that is why Islamic banking is also
appreciated by the Muslim countries. The main reason
behind the appreciation of Islamic banking is the
prohibition of interest in the financial transactions.
In Pakistan, the growth rate of Islamic banking is at very
fast pace as compared to the other countries of the world.
That’s why state bank of Pakistan established a separate
Islamic banking department to support the Islamic banking
to make it as the first choice of the banking.