Pakistan’s Shariah-compliant banking will continue to grow: Moody’s

March 8, 2022 (MLN): Shariah-compliant banking, an integral part of Pakistan's National Financial Inclusion Strategy (NFIS) will continue growing by targeting customers who prefer Islamic products and were previously considered unbankable due to their religious beliefs, Moody’s Investors Service said in a report issued today.

According to the enhanced NFIS targets, the government of Pakistan and the State Bank of Pakistan (SBP) target an Islamic banking market share of 25% by 2023 from 17% in 2020, it noted.

The report further noted that the government and central bank are also supporting the sector by introducing a Shariah-compliant regulatory framework and adopting the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Shariah standard.

With regards to the Islamic finance industry, the report predicted that the accelerating economic recovery, higher oil prices and interest rate hikes to have mixed implications for the Islamic finance industry in 2022.

The economic recovery in key Islamic finance markets will boost credit growth and demand for Shariah-compliant products and it is expected Islamic banks' asset growth to continue to outperform their conventional peers. At the same time, higher oil prices will lead to lower Sukuk issuance in 2022, largely driven by lower financing needs in the Gulf Cooperation Council (GCC).

To note, the Sukuk issuance declined by 12% in 2021 to $181 billion amid lower sovereign funding needs in the GCC and Indonesia given higher oil prices and economic recovery.

It is expected that issuance activity to further decline in 2022, to $160-$170 billion, as high oil prices continue to support GCC countries' fiscal positions, the report added.

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Posted on: 2022-03-08T13:45:40+05:00