Sindh Bank has posted a substantial improvement in its key financial indicators despite being a fairly new entity.
With a prayer to rid the economy of the ‘curse’ of interest, State Bank of Pakistan (SBP) Deputy Governor Saeed Ahmad inaugurated the maiden Islamic banking branch of Sindh Bank on Thursday.
Following the establishment of an Islamic banking division last December, Sindh Bank received the permission to set up five Islamic banking branches in 2014. According to Sindh Bank President Muhammad Bilal Sheikh, four dedicated Islamic branches will become operational within two to three months.
“Equity transfers from the head office to the Islamic banking division amount to Rs500 million,” Sheikh said, adding that the launch of Shariah-compliant business, under the name of Sa’adat, by Sindh Bank will play a key role in expanding the scope of Islamic banking in Pakistan.
Speaking on the occasion, the SBP deputy governor said Islamic banking institutions have attracted deposits in large numbers, which shows people consider Shariah-compliant banking trustworthy.
Deposits of the Islamic banking industry stood at Rs872 billion at the end of the first quarter of 2014, up 23.8% from March 2013. The market share of Islamic banking industry’s deposits in the overall banking industry stood at 10.7% in March, up 1% from the market share of 9.7% one year ago.
Reflecting upon the problems being faced by the Islamic banking industry, Ahmed said liquidity management, especially in the short run, remains a key issue that should be addressed at the earliest.
“Islamic banks and banks with Islamic window operations have high deposits, but the investment avenues available to them remain limited,” he said, adding that big infrastructure projects undertaken by the government should be financed through Islamic means.
With regard to the Islamic fund being established by the central bank to help meet the liquidity needs of Islamic banking institutions, Ahmed said the SBP will become the “provider of the last resort” for Islamic banks with the streamlining of the proposed project.
Sindh Bank has posted a substantial improvement in its key financial indicators despite being a fairly new entity. For example, its pre-tax profit was Rs287 million at the end of the first quarter of the current year, up 33.2% from March 2013.
Its deposits increased 40.7% over the same period to stand at Rs48.3 billion on March 31. Sindh Bank’s advances amount to Rs32.8 billion, which is 44.7% higher than the amount of advances made until March 2013.