New Release of IFSB’s Prudential Database from 17 Countries Shows Improved Islamic Banking Performance in Most Dimensions of Stability
Date posted: 16 October 2017
16 October 2017, Kuala Lumpur – The Islamic Financial Services Board (IFSB) is pleased to announce the dissemination of country-level data on financial soundness and growth of the Islamic banking systems for Q4 of 2016 and Q1 of 2017 from 17 IFSB member jurisdictions. This seventh dissemination completes the availability of quarterly data from Q4 of 2013 to Q1 of 2017.
Acting Secretary-General of the IFSB, Mr. Zahid ur Rehman Khokher stated: “I am pleased that the dissemination of the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) database project has reached 14 quarters, and that it will soon be extending to four new jurisdictions. This means that in 2018, the PSIFIs database will comprise data from 21 contributing countries, bringing the coverage of the data to over 95% of the global Islamic banking activity, an increase from the existing 90%.” He added, “The IFSB also plans to release sector level balance sheets of entire jurisdictions for the Islamic banking market starting early next year.” Mr. Khokher further mentioned that “following the approval of the IFSB Council to extend the coverage of this project to the Takaful and Islamic capital market sectors, the IFSB has completed a comprehensive survey on the selection of soundness indicators for these two sectors, and is in the midst of updating the PSIFIs Compilation Guide.” The survey was conducted among the IFSB’s member regulatory and supervisory authorities.
This seventh dissemination is part of the IFSB’s PSIFIs project, which currently compiles data from 17 member countries – Afghanistan, Bahrain, Bangladesh, Brunei, Egypt, Indonesia, Iran, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Sudan, Turkey, and the United Arab Emirates.
With the launch of Phase IV of the project in early 2017, four new regulatory and supervisory authorities joined the PSIFIs project, making a total of 21 participating jurisdictions. The IFSB is now in the process of collecting Islamic banking data on trial basis from these new contributors: Qatar Central Bank, Bank of England, Central Bank of Lebanon (Banque du Liban) and Palestine Monetary Authority.
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 USD 1,391 billion in 2016Q1 to USD 1,480 billion in 2017Q1 (calculated from country-wise aggregated data converted into USD terms using end-period exchange rates). Total funding/liabilities increased from USD 1,283 billion in 2016Q1 to USD 1,362 billion in 2017Q1. Financing by Islamic banks from the jurisdictions participating in the PSIFIs project reached USD 967 billion in 2017Q1 from USD 882 billion in 2016Q1. The data on “financing by type of Sharī`ah-compliant contracts” reveals that five major financing contracts used by the Islamic banking industry as of 2017Q1 were: Murābahah (36.2%), commodity Murābahah/Tawwaruq (21.5%), Ijārah/Ijārah Muntahia Bittamlīk (13.4%), Bay` Bithaman Ajil (8.4%), and Salam (5.5%).
Capital adequacy provides an important indication of the health and financial soundness of the banking industry in a jurisdiction. As of the 1st quarter of 2017, 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 12.5% and 9.9% respectively, while these ratios were 11.9% and 9.6% at the same period of the previous year (2016Q1) respectively.
On asset quality indicators, gross non-performing financing ratio (gross non-performing financing to total financing) showed an improvement with a decrease from 5.9% in 2016Q1 to 5.2% in 2017Q1. The improvement is also apparent in the net non-performing financing to capital ratio which decreased sharply from 38.1% in 2016Q1 to 22.6% in 2017Q1.
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 1.76% and 12.80% in 2017Q1 as compared to 1.30% and 12.57% in 2016Q1 respectively.
On the liquidity indicators, the liquid assets ratio (liquid assets to total assets) decreased over the period from 35.7% in 2016Q1 to 34.5% in 2017Q1, while liquid assets to short-term liabilities ratio increased from 13.9% in 2016Q1 to 14.6% in 2017Q1. Four PSIFIs member countries reported the newly introduced Liquidity Coverage Ratio (LCR) which all exceeded the 100 percent benchmark.
Size of Islamic Banking
The number of full-fledged Islamic banks and Islamic windows of conventional banks in 17 countries stood at 172 and 83 in 2017Q1 as compared to 170 and 85 in 2016Q1 respectively. At the end of 2017Q1, a total of 382,331 staff members were working in 29,667 branches of full-fledged Islamic banks, an increase of 826 staff members but a decrease of 224 branches over the year from 2016Q1.
The PSIFIs Database (full set of data with metadata) is available on the PSIFIs portal at the IFSB website http://psifi.ifsb.org.
The Task Force of PSIFIs project includes representatives from 21 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, fifth, and sixth sets of data released on 24 November 2015 and 14 March 2016, 1 July 2016, 28 November 2016 and 15 May 2017 respectively.
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