Meezan Banks potential acquisition by a BVI-based group and MCBs potential acquisition of Burj Bank were some other stories that caught the eyes during the year. The Islamic banking bulletin recently released by the SBP also sheds light on some of the important milestones achieved during the year.
With the addition of 207 branches in CY13, Islamic banking expanded its footprint in eighty seven districts across the country with industry-wide branch network standing at 1,304 branches. Besides, spreading its outreach in the existing districts, four new districts-Jamshoro and Umer Kot in Sindh, Buner in KPK and Baltistan in Gilgit-Baltistan-were taken into the folds of Shariah banking.
The Islamic banking assets boasted a phenomenal year-on-year growth of 21.2 percent in CY13 whereby it touched a double digit market share of 11.2 percent in CY13 vis-à-vis 8.6 percent in CY12.
The growth in Islamic assets primarily came on the back of Islamic financing that saw a year-on-year growth of 34 percent in CY13 to clock in at Rs330.2 billion.
Conversely, owing to limited choice of equity instruments available to the Islamic banks and the non-issuance of GOP Ijara Sukuk over the last nine months, the investments of Islamic banks faltered in CY13. In terms of financing modes, Murabaha financing and diminishing musharaka take the lead, representing over 70 percent in the overall financing mix.
Client-wise bifurcation shows that Islamic banking continued to be a conservative lender with 71.8 percent of its lending concentrated in corporate sector. The sectors supposed to be on priority--SME and agriculture --remained as step children with the representation of 5.1 percent and 0.1 percent, respectively, in total Shariah financing. Owing to its watchful lending stance biased towards lesser risky corporate clients, the asset quality of Islamic sector significantly kept improving in CY13 whereby it attained the infection ratio of 5.7 percent versus 7.6 percent in CY12.
With a lot of conventional banks keen to expand their share in Islamic banking arena, the existing players need to distinguish themselves to retain and grow their clientele. The untapped segments such as agriculture and SME offer tremendous potential to those eager to build their unique selling proposition.
Innovative product offering and better customer service besides spreading awareness will also go a long way in helping the counterparts to stay in limelight.
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