Growth of Islamic Finance in Pakistan

Assets of Islamic banks have doubled in the last four years and SECP is now considering amending laws and giving tax relief to enable them to issue sukkuk bonds and real estate investment trust.

“The assets in Islamic banking (in Pakistan) have doubled, jumping from Rs837 billion to Rs1.6 trillion, from 2012 to 2016, now accounting for 11.7% of the total banking assets,” said Securities and Exchange Commission of Pakistan (SECP) in a handout on Saturday.

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Non-banking financial institutions (NBFI) enjoy more support in religious classes of the country than Islamic banks. This is evidenced by stronger growth of assets in Sharia-compliant NBFI. The market share of assets in Islamic NBFI has grown from 14%, in 2002, to 33% now.

 “The SECP has recently conducted two consultation sessions with market participants to facilitate issuance of sukuk and real estate investment trust (REIT),” said Usman Hayat, head of the Islamic Finance Department at the SECP.

“The SECP is analyzing industry proposals and it shall consider making appropriate amendments to the relevant regulations, further reducing the cost and hassle for both issuers and investors. The industry proposals pertaining to tax issues regarding sukuk and REIT are being referred to the FBR,” he added.

At present 21 banking organizations are offering Islamic banking services in the country through 2,322 branches in 112 districts across the country.  “The SBP has a holistic approach to the promotion of Islamic banking and is providing enabling policy environment, Sharia governance, risk management, and capacity building,” says Ghulam Muhammad Abbasi, head of the Islamic Banking Department at SBP.

The assets of Islamic financial institutions are growing at a rapid pace but it is yet to be seen as how Islamic is the Islamic finance.