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Pakistan has had Islamic banking since the 1980s but four decades on and the sector is still a small 11.6 percent of the country’s overall banking industry. However, it is a growth sector, with Shariah-compliant deposits gaining 0.5 percent and assets 0.2 percent of overall banking market share from June 2016 to June 2017, according to data released last week by the State Bank of Pakistan.
The major flow of funds in Pakistan’s $19.4 billion Islamic banking industry focuses on financing as opposed to investment. This was split 48 percent and 26 percent, respectively, of total assets by the end of June 2017. Most financing was extended to corporates but there has been a marked decrease - from 78.1 percent in June 2016 to 71.1 percent in June 2017.
Financing to small- and medium-sized enterprises (SMEs) nudged up ever so slightly from 2.8 percent of Islamic banks’ total financing in June 2016 to 3.2 percent of their financing portfolio in June 2017. This is equivalent to around $300 million.
This is a very small but positive growth as SMEs account for 90 percent of all businesses and contribute around 40 percent to GDP.
Still, for Pakistan’s Islamic economy SMEs, $300 million in Shariah-compliant financing is a very small pot to play with, considering two key factors: 1. The sum is extended to a range of more than 10 sectors;
2. The government’s ambition to export more halal meat and dairy, which it announced earlier this month.
Islamic banks extended 8.5 percent of their financing portfolio to the agribusiness sector, which is equivalent to around $25.5 million. This is small fries for Pakistan’s animal and meat-related exports, which was valued at $313.5 million in 2016. SMEs in this sector would need financial support to scale up if they are to meet the government’s call for an increase in halal exports.
Further reading from Salaam Gateway:
© Zawya 2017
The major flow of funds in Pakistan’s $19.4 billion Islamic banking industry focuses on financing as opposed to investment. This was split 48 percent and 26 percent, respectively, of total assets by the end of June 2017. Most financing was extended to corporates but there has been a marked decrease - from 78.1 percent in June 2016 to 71.1 percent in June 2017.
Financing to small- and medium-sized enterprises (SMEs) nudged up ever so slightly from 2.8 percent of Islamic banks’ total financing in June 2016 to 3.2 percent of their financing portfolio in June 2017. This is equivalent to around $300 million.
This is a very small but positive growth as SMEs account for 90 percent of all businesses and contribute around 40 percent to GDP.
Still, for Pakistan’s Islamic economy SMEs, $300 million in Shariah-compliant financing is a very small pot to play with, considering two key factors: 1. The sum is extended to a range of more than 10 sectors;
2. The government’s ambition to export more halal meat and dairy, which it announced earlier this month.
Islamic banks extended 8.5 percent of their financing portfolio to the agribusiness sector, which is equivalent to around $25.5 million. This is small fries for Pakistan’s animal and meat-related exports, which was valued at $313.5 million in 2016. SMEs in this sector would need financial support to scale up if they are to meet the government’s call for an increase in halal exports.
Further reading from Salaam Gateway:
- Pakistan’s Islamic bank market share of deposits gain 0.5 pct, assets up 0.2 pct Jun 2016 to Jun 2017
- How big is Pakistan’s meat trade and who’s buying its exports?
- Dubai, Malaysia, to cooperate on fintech, Islamic sector ‘of particular interest’
- UAE withdraws US-made Kikkoman soy sauce for alcohol content after halt on Japanese imports
- UAE lifts temporary ban on German imports of live birds, poultry, eggs
© Zawya 2017
