The central bank, backed by the Government of Pakistan, is going to acquire membership of the Malaysian-based International Islamic Liquidity Management Corporation (IILM) to develop Shariah-compliant liquidity management solutions for the Islamic banking industry (IBI) in Pakistan. The IILM is a supranational institution, formed to develop liquidity management solutions for Islamic banking and finance industry in collaboration with governments and central banks of the member countries.
The State Bank has sought membership of the IILM to be part of an important international forum which would further enlarge investment avenues for the IBIs. “The Central Board of SBP has approved to acquire the membership of IILM,” said the Islamic Banking Bulletin (December 2010) released by the central bank on Saturday. The State Bank, fully supported by the Government of Pakistan, is taking all out measures, including enhancing the holding limit of Ijara Sukuk to 35 percent of the issue amount, to facilitate and promote the local Islamic banking industry which despite the ongoing global economic downturn has been growing remarkably over the last few years.
According to SBP’s report, the IBI’s assets base during the quarter under review increased by 12.5 percent to Rs 477 billion from Rs 424 billion as at the close of September 2010; the annual growth in assets was 30 percent. Deposits, during the quarter, increased to Rs 390 billion from Rs 338 billion in September 2010, reflecting a quarterly growth of 15.3 percent, while an annual growth of 38 percent was seen, the report added. It noted that the IBI maintained its growth trajectory during the last quarter of calendar year 2010, despite various challenges faced by the country’s ailing economy.
Investment and financing activity recorded a big surge during the quarter with a quarterly 96 percent and 18 percent growth respectively. “The unprecedented surge in investments is attributable to issuance of long awaited GOP Ijarah Sukuk of Rs 89 billion during the quarter,” the report said. Whereas, it added, handy growth of 18 percent in financing could be attributed to seasonal uptake in credit; the cotton harvesting commences during the October-December quarter that gives significant rise to credit/financing demands by textile sector (share of financing by IBIs to the textile sector increased from 18 percent to 22 percent during the quarter).
The annual growth in investments and financing was 144 percent and 33 percent, respectively, as they increased to Rs 158 billion and Rs 180 billion in December 2010 from Rs 72 billion and Rs 153 billion in December 2009, it said. The SBP’s report said that pick-up in financing and investment activities during the current quarter was encouraging and would be instrumental in further accelerating growth momentum, as the enlarged investment avenues would give boost to IBIs’ drive for deposit mobilisation.
During the period under review, the report said, the capital to total assets of Islamic banks stood at 9.7 percent as compared to 9.8 percent for the whole industry. Regarding financing portfolio of the IBI, the report said that financing type wise mix of IBIs’ financing portfolio showed that Murabaha based financing further strengthened its dominance in IBIs portfolio with almost three percentage points increase in its share in the IBIs’ portfolio.
This also led to an increase in share of Murabaha, Ijarah and diminishing Musharaka to 88 percent from 85 percent, as at the beginning of the quarter, it said. The Islamic banking branch network also saw an encouraging expansion and increased, in number, to 751 branches, exhibiting an annual increase of 100 branches, the report said. The SBP bulletin said the Governor SBP, in a bid to promote local Islamic banking industry, had attended last year in December the council meeting of Islamic Financial Services Board (IFSB) in Saudi Arabia. IFSB is an apex institution, which is engaged in the development of prudential standards for Islamic banking and finance industry.
SBP will join IILM to manage Islamic banks’ liquidity issues
