According to Moody’s, Pakistan’s Islamic banking assets are expected to grow by 25% to 28% over the next five years.
Moody’s stated in research issued on Tuesday that Pakistan’s Islamic banking industry is fast expanding, thanks to a mix of a primarily Muslim population, relatively low financial inclusion, and the government’s and regulators’ commitment as the primary driving factor.
“We expect growth in Islamic banking to continue to materially outpace conventional banking, reaching a market share of total assets and deposits of around 30% by end 2026, with net financing market share at around 33%. We estimate average growth over 2021-2026 to range between 25%-28% for total assets and deposits, and over 20% for net financings,” said Constantinos Krypreos, Moody’s Senior Vice President.
According to the research, Islamic banking assets in Pakistan have expanded at a rate of 24 percent per year over the last decade to Rs5,577 billion ($31.2 billion), accounting for around 19 percent of total banking assets, up from 8 percent in 2011. “We anticipate yearly growth of more than 25% over the next five years, increasing the sector’s market share to roughly 30%,” it added.
Key growth drivers are a big Muslim population and yet little financial inclusion. The majority of the country’s 210 million-strong population is Muslim.
Furthermore, despite recent progress, financial inclusion in Pakistan remains modest; according to the State Bank of Pakistan (SBP), approximately 62 percent of the country’s adult population has an account with a formal financial institution, compared to an average of 95 percent in high-income countries.
The confluence of these variables serves as the foundation for the industry’s growth. Previous research has also found a high demand for Islamic banking products, with religious factors playing an important role in the decision-making process.
To read our blog on “Pakistan’s first Islamic E-Commerce payment gateway to be launched by Meezan Bank,” click here.
