The Islamic Financial Services Board (IFSB) has released its 6th dissemination of country-level data for Q2 to Q316 on financial soundness and growth of the Islamic banking systems from 17 IFSB member jurisdictions.
This 6th dissemination presents a total of 12 quarters of Islamic banking sector data, from Q413 to Q316, 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 Acting Secretary-General of the IFSB, Zahid ur Rehman Khokher stated that with the approval of the IFSB Council at its recent meeting in April 2017, “the IFSB will extend the coverage of this PSIFIs project to the takāful and Islamic capital market sectors. The IFSB will work closely with its member regulatory and supervisory authorities (RSAs) from these two sectors and multilateral organisations on the selection of the relevant soundness indicators and the preparation of a Compilation Guide for the reference of contributing organisations and users,”
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$1,299 billion in Q315 to US$1,441 billion in Q316 (calculated from country-wise aggregated data converted into US dollar terms using end-period exchange rates). Total funding/liabilities increased from US$1,205 billion in Q315 to US$1,318 billion in Q316. Financing by Islamic banks from the jurisdictions participating in the PSIFIs project reached US$939 billion in Q316 from US$826 billion in Q316. 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 Q316 were: murābaḥah (37.6%), commodity nurābahah/tawwaruq (22.5%), ijārah/ijārah muntahia bittamlīk (13.8%), bayʻ bithaman ajil (11.0%), and salam (5.6%).
Capital adequacy
Capital adequacy provides an important indication of the health and financial soundness of the banking industry in a jurisdiction. As of the Q316, the weighted-average capital adequacy ratio and weighted-average Tier 1 capital ratio from available data of full-fledged Islamic banks of 13 jurisdictions were 17.5% and 16.3% respectively, significantly higher than the regulatory requirements, while these ratios were 12.6% and 10.1% at the same period of the previous year (Q315) respectively.
Asset Quality
On asset quality indicators, gross non-performing financing ratio (gross non-performing financing to total financing) showed a slight improvement with a decrease from 5.9% in Q315 to 5.3% in Q316. However, a deterioration is apparent in the net non-performing financing to capital ratio which increased sharply from 16.1% in Q315 to 25.6% in Q316.
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 1.45% and 11.94% in Q316 as compared to 1.36% and 13.86% in Q315 respectively.
Liquidity
On the liquidity indicators, the liquid assets ratio (liquid assets to total assets) and liquid assets to short-term liabilities ratio decreased over the period from 39.6% and 15.1% in Q315 to 35.6% and 13.9% in Q316 respectively. Five PSIFIs member countries reported the newly introduced Liquidity Coverage Ratio (LCR), which all exceeded the 100% benchmark.
Size of Islamic banking market
The number of full-fledged Islamic banks and Islamic windows of conventional banks in 17 countries stood at 170 and 83 in Q316 as compared to 169 and 85 in Q315 respectively. At the end of Q316, a total of 380,040 staff members were working in 29,733 branches of full-fledged Islamic banks, an increase of 243 branches but a decrease of 8,381 staff over the year from Q315.
Three new country contributors have also been added to the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) project,
including the Central Bank of Lebanon (Banque du Liban) and Palestine
Monetary Authority. This brings the total number of contributors to the PSIFIs project to 20 jurisdictions.
The Task Force of PSIFIs project includes representatives from all 17 participating regulatory and supervisory authorities 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, fourth, and fifth sets of data released on 24 November 2015, 14 March 2016, 1 July 2016 and 28 November 2016 respectively.
Interested?
View the PSIFIs Database (full set of data with metadata) on the PSIFIs portal at the IFSB website