Kuala Lumpur, 28 November 2016 – The Islamic Financial Services Board (IFSB) is pleased to announce the dissemination of country-level data on financial soundness and growth of the Islamic banking systems from 17 IFSB member jurisdictions. This fifth dissemination covers quarterly data from December 2013 to Q1 of 2016, contributing to a total data release for 10 quarters. This dissemination is part of the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) project, which currently compiles data from 17 member countries (Afghanistan, Bahrain, Bangladesh, Brunei, Egypt, Indonesia, Iran, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Sudan, Turkey, and United Arab Emirates). 

The Secretary-General of the IFSB stated: “I am pleased that the IFSB’s database project is advancing at a consistent pace, reflecting the strong support from the participating countries and multilateral bodies that form the members of the PSIFIs Task Force. This new dissemination presents quarterly data from December 2013 to March 2016, in a well-structured, standardised and reliable set of indicators.”  He further mentioned that “This relatively long data series allows the IFSB to use the information in the analysis of strength and vulnerabilities of Islamic banking systems in member countries in the upcoming IFSB Islamic Financial Services Industry Stability Report 2017. This data set will permit the IFSB, for the first time, to depart from its previous approach of using sample data in the analysis of soundness of the Islamic banking sector in the Report.”

A summary of key PSIFI indicators is given below.

Growth of Islamic Banking

Based on the available data, the total assets of the Islamic banking industry grew from USD 1,289 billion in 2015Q1 to USD 1,403 billion in 2016Q1 (calculated from country-wise aggregated data converted into USD terms using end-period exchange rates). Total funding/liabilities increased from USD 1,200 billion in 2015Q1 to USD 1295 billion in 2016Q1. Financing by Islamic banks from the jurisdictions participating in the PSIFIs project reached USD 891 billion in 2016Q1 from USD 842 billion in 2015Q1. The data on “financing by type of Shariah-compliant contracts” reveals that five major financing contracts used by the Islamic banking industry as of 2015Q3 were: Murabahah (36.5%), commodity Murabahah/Tawwaruq (24.3%), Bay Bithaman Ajil (13.6%), Ijarah/Ijarah Muntahia Bittamlik (11.1%), and Salam (5.5%).

Capital Adequacy

Capital adequacy provides an important indication of the health and financial soundness of the banking industry in a jurisdiction. As of the 1st quarter of 2016, the average capital adequacy ratio and average Tier 1 capital ratio from 16 jurisdictions were 17.8% and 16.1 % respectively, significantly higher than the regulatory requirements, though lower than the same period of the previous year (2015Q1) when these  ratios were 19.8% and 18.1% respectively.

Asset Quality

On asset quality indicators, gross non-performing financing ratio (gross non-performing financing to total financing) showed a deterioration with an increase from 4.8% in 2015Q1 to 5.3% in 2016Q1 on an average. However, an improvement is apparent in the net non-performing financing to capital ratio which decreased slightly from 16.8% in 2015Q1 to 15.8% in 2016Q1.

Earnings

Islamic banks and Islamic windows in the PSIFIs member countries generally maintained comparable rates of return on assets (ROA) and return on equity (ROE) during the periods under report. Overall, the ROA and ROE were 1.3% and 13.5% in 2016Q1 as compared to 1.0% and 10.6% in 2015Q1 respectively.

Liquidity

On the liquidity indicators, the liquid assets ratio (liquid assets to total assets) and liquid assets to short-term liabilities ratio decreased marginally over the period from 36.4% and 16.3% in 2015Q1 to 35.7% and 13.9% in 2016Q1 respectively. Five PSIFIs member countries reported the newly introduced Liquidity Coverage Ratio (LCR) which exceeded the 100 percent benchmark.

Size of Islamic Banking

The number of full-fledged Islamic banks and Islamic windows of conventional banks in 17 countries stood at 170 and 85 in 2016Q1 as compared to 165 and 86 in 2015Q1 respectively. At the end of 2016Q1, a total of 389,040 staff members were working in 29,891 branches of full-fledged Islamic banks, an increase from 748 branches and 6,000 staff over the year from 2015Q1.

The PSIFIs Database (full set of data with metadata) is available on the PSIFIs portal at the IFSB website http://psifi.ifsb.org.

PSIFIs Background

The Task Force of PSIFIs project includes representatives from all 17 participating jurisdictions that work as coordinators for regular submission of data of the respective countries and work with the IFSB during the due processes of data collection, compilation, revision, and approval. Three international organisations – the International Monetary Fund (IMF), Islamic Development Bank (IDB) and the Asian Development Bank (ADB) are also members of the Task Force. 

The first set of PSIFIs data was released on 27 April 2015 covering the period of December 2013. The second, third and fourth sets of data released on 24 November 2015, 14 March 2016 and 1 July 2016 included the indicators for the four quarters of 2014 and three quarters of 2015 respectively.

About the Islamic Financial Services Board (IFSB)

The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry-related issues, as well as organises roundtables, seminars and conferences for regulators and industry stakeholders. Towards this end, the IFSB works closely with relevant international, regional and national organisations, research/educational institutions and market players.

The members of the IFSB comprise regulatory and supervisory authorities, international inter-governmental organisations and market players, professional firms and industry associations. For more information about the IFSB, please visit www.ifsb.org.

© Press Release 2016