The Islamic Financial Services Board (IFSB) has released country-level data on financial soundness and growth of Islamic banking systems from 17 IFSB member jurisdictions.
This fifth dissemination covers quarterly data from December 2013 to Q116, contributing to a total data release for 10 quarters, and is part of the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) project, which currently compiles data from 17 member countries*.
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.
“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 US$1,289 billion in Q115 to US$1,403 billion in Q116**. Total funding/liabilities increased from US$1,200 billion in Q115 to US$1295 billion in Q116. Financing by Islamic banks from the jurisdictions participating in the PSIFIs project reached US$891 billion in Q116 from US$842 billion in Q115. The data on financing by type of shari'ah-compliant contracts reveals that five major financing contracts used by the Islamic banking industry as of Q315 were: murābahah (36.5%), commodity murābahah/tawwaruq - (التورق) - 24.3%, bai' bithaman ajil (13.6%), ijārah/ijārah muntahia bittamlīk (11.1%), and salam (بيع سلم,) - 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 Q116, 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 (Q115) 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 Q115 to 5.3% in Q116 on an average. However, an improvement is apparent in the net non-performing financing to capital ratio which decreased slightly from 16.8% in Q115 to 15.8% in Q116.
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 Q116 as compared to 1.0% and 10.6% in Q115 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 Q115 to 35.7% and 13.9% in Q116 respectively. Five PSIFIs member countries reported the newly introduced Liquidity Coverage Ratio (LCR) which exceeded the 100% 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 Q116 as compared to 165 and 86 in Q115 respectively. At the end of Q116, 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 Q115.
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 and covered December 2013. The second, third and fourth sets of data were released in November 2015, March 2016 and July 2016 respectively. They included the indicators for the four quarters of 2014 and three quarters of 2015.
Interested?
Browse the full set of data with metadata in the PSIFIs Database
*The countries are Afghanistan, Bahrain, Bangladesh, Brunei, Egypt, Indonesia, Iran,
Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, KSA, Sudan,
Turkey, and the UAE.
**Calculated from country-wise aggregated data converted into US dollar terms using end-period exchange rates.