KARACHI: The Islamic banking industry of Pakistan has posted 30% and 27.8% growth in overall assets and deposits respectively during 2020, the highest such increase since 2012, central bank data shows, driven by increasing access to shariah-compliant financial instruments and growing faith-based demand.
Twenty-two Islamic banking institutions currently operate in Pakistan: five Islamic banks and 17 conventional banks with standalone Islamic banking branches.
The overall assets of the industry increased to Rs4.3 trillion while deposits reached Rs3.4 trillion by the end of December 2020, accounting for 17% of all assets and 18.3% of all deposits of the country’s entire banking industry, according to the State Bank of Pakistan (SBP).
“This is the highest increase in assets in a year since 2012 and in deposits since 2015,” the SBP said on Wednesday in its Islamic Banking Bulletin report for the quarter that ended on December 31, 2020.
“Over the last five years, both assets and deposits of the Islamic banking industry have more than doubled,” the central bank said. “This growth in assets and deposits of the Islamic banking industry is encouraging, particularly due the fact that the industry was also faced with the COVID-19 pandemic challenges during 2020.”
Financing for the Islamic banking industry also grew by 16% during 2020, and the non-performing finances (NPFs) to financing (gross) ratio declined from 4.3 %, as of the end of December 2019, to 3.2%, as of the end of December 2020.
Bankers say the growth in Islamic banking, where under shariah the payment and receipt of interest is strictly prohibited, is driven main due to increasing access.
Sana Tawfik, banking sector analyst at Arif Habib Limited, said the central bank had been promoting the sector’s development through the introduction of legal, regulatory and shariah-compliant frameworks for instruments such as Naya Pakistan Certificates (NPCs) under the Roshan Digital Account (RDA) initiative, which are available to overseas Pakistanis and those who had declared assets abroad.
“Steps taken by SBP to promote Islamic banking, inflows through RDA in NPCs, Islamic sukuks and the increasing frequency of sukuk auctions are the other couple of reasons driving it,” Tawfik said.
Ahmed Ali Siddiqui, senior executive vice president of Meezan Bank — Pakistan’s first full-fledged Islamic bank — told Arab News there was “stronger public demand” for shariah based or interest free banking.
“It is continuously fueling growth,” he said. “The development of Islamic capital market and availability of financial instruments like Sukuk expedited the growth.”
He added that the COVID-19 pandemic had proven the stability of Islamic banking.
“Surprisingly Islamic banking has shown strongest growth during COVID-19 crisis,” Siddiqui said. “This shows the stability factors of the Islamic economic system based on real economic conditions.”
Pakistani Islamic banking sector posts 30% growth — central bank
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Pakistani Islamic banking sector posts 30% growth — central bank
- Overall industry assets increased to Rs4.3 trillion, deposits reached Rs3.4 trillion by end of December 2020
- Bankers say growth driven by increasing access to shariah-compliant financial instruments and growing faith-based demand
Pakistan regulator amends law to facilitate capital raising by listed companies
- The amendments address challenges faced by listed companies when raising further capital from existing shareholders through a rights issue
- Previously, listed companies were prohibited from announcing a rights issue if the company, officials or shareholders had any overdue amounts
KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has notified amendments to the Companies (Further Issue of Shares) Regulations 2020 to facilitate capital raising by listed companies while maintaining adequate disclosure requirements for investors, it announced on Monday,
The amendments address challenges faced by listed companies when raising further capital from existing shareholders through a rights issue. Previously, listed companies were prohibited from announcing a rights issue if the company, its sponsors, promoters, substantial shareholders, or directors had any overdue amounts or defaults appearing in their Credit Information Bureau (CIB) report.
This restriction constrained financially stressed yet viable companies from raising capital, even in circumstances where existing shareholders were willing to support revival, restructuring, or continuation of operations, according to the SECP.
“Under the amended framework, the requirement for a clean CIB report will not apply if the relevant persons provide a No Objection Certificate (NOC) regarding the proposed rights issue from the concerned financial institution(s),” the regulator said.
The notification of the amendments follows a consultative process in which the SECP sought feedback from market stakeholders, including listed companies, issue consultants, professional bodies, industry associations, law firms, and capital market institutions.
The amendments are expected to enhance market confidence, improve access to capital for listed companies, and strengthen transparency within the rights issue framework, according to the SECP.
“To ensure transparency and protect investors’ interests, companies in such cases must make comprehensive disclosures in the rights offer document,” the regulator said.
“These disclosures must include details of any defaults or overdue amounts, ongoing recovery proceedings, and the status of any debt restructuring.”
The revised regulations strike an “appropriate balance” between facilitating corporate rehabilitation and enabling investors to make informed investment decisions, the SECP added.
