ISLAMABAD: The share of Islamic Banking Institutions (IBIs) in bankingsector’s asset increased to 14.4 percent during the first half of thecurrent calendar year, State Bank of Pakistan (SBP) reported.
According the latest report of SBP, the IBIs contribution in total assetsflows during January-June 2019 was the highest in the last three years,indicating growing significance of IBIs.
With the widespread deceleration in advances growth, the advances couldonly contribute 14.4 percent share in the asset growth during the periodunder review, lower than the average of 53.3 percent during the comparableperiod of last 3 years.
The demand for loanable funds weakened in both the private and publicsectors, SBP said, adding that the growth in private sector advancesremained minimal during the period as compared to average expansion of 7.6percent in the comparable period of last three years.
This slowdown in private sector advances also resulted from increased riskaversion by banks, besides the seasonality.
On the supply side, banks became risk averse as they anticipated rise indefaults in the private sector due to hike in interest rates as well asslowdown in economic activity.
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Simultaneously, the increased return on risk-free securities (T-bills andPIBs), due to monetary tightening, made investment in such securitiesattractive for the banks in second quarter of this year.
In this backdrop, the shift in demand for and supply of advances reinforcedthe slowdown, the report added.
Dissecting the demand of the private sector, the sector-wise flow ofadvances during the first half indicated a broad based reduction.
Significant retirement was made by the textiles, more than their usualseasonal trend, the report added.
