Kuala Lumpur, 14 March 2016 – The Islamic Financial Services Board (IFSB) is pleased to announce the third dissemination of data on financial soundness and growth of the Islamic banking systems in participating IFSB member jurisdictions, covering quarterly data from December 2013 to the Q2 of 2015. The dissemination is part of the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) project, which currently compiles data from 17 member countries.
This release expands the data provided in the earlier releases as many member jurisdictions have improved their data collection and consolidation of their frameworks for the Islamic banking industry, in line with the requirements of PSIFIs project. In this release, a few jurisdictions have also started reporting the data on newly introduced Basel III indicators such as the leverage ratio, Liquidity Coverage Ratio (LCR), and Net Stable Funding Ratio (NSFR) during the observation period.
An important feature of the current dissemination is the inclusion of Islamic banking data of the United Arab Emirates, released for the first time, as the country became the 17th member of the PSIFIs project in December 2015. The 17 countries participating in this project are: Afghanistan, Bahrain, Bangladesh, Brunei, Egypt, Indonesia, Iran, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Sudan, Turkey, and United Arab Emirates.
Accordingly, the IFSB Task Force on PSIFIs now includes representatives from all 17 member jurisdictions as well as three international organisations – the International Monetary Fund (IMF), Islamic Development Bank (IDB) and the Asian Development Bank (ADB). The international collaboration between the IFSB, multilateral institutions and participating countries has greatly facilitated the collection of Islamic banks data and enhanced the clarity and consistency of indicators across jurisdictions. A summary on key PSIFI indicators are given below.
Growth of Islamic Banking
Based on the available data, the total assets of the Islamic banking industry grew from USD 1,208 billion in 2014Q2 to USD 1,293 billion in 2015Q2 (calculated from country-wise aggregated data converted into USD terms using end-period exchange rates). Total funding/liabilities grew from USD 1,027 billion in 2014Q2 to USD 1,120 billion in 2015Q2. Financing by Islamic banks from the jurisdictions participating in the PSIFI project reached USD 733 billion in 2015Q2 from USD 678 billion in 2014Q2. The data on “financing by type of Sharī`ah-compliant contracts” reveals that four major financing contracts used by the Islamic banking industry as on 2015Q2 were: Murābahah (41.3%), commodity Murābahah/Tawwaruq (14.6%), Ijārah/Ijārah Muntahia Bittamlīk (14.5%), and Bay` Bithaman Ajil (7.5%).
Capital Adequacy
Capital adequacy provides an important indication of the health and financial soundness of the banking industry in a jurisdiction. As of the 2nd quarter of 2015, the average capital adequacy ratio and average Tier 1 capital ratio from 16 jurisdictions were 19.2% and 17.4 % respectively, significantly higher than the regulatory requirements. The average capital adequacy ratio and average Tier 1 capital ratio were 22.7% and 21.4% at the same period of the previous year (2014Q2),
Asset Quality
On asset quality indicators, gross non-performing financing ratio (gross non-performing financing to total financing) showed an improvement with a decrease from 6.3% in 2014Q2 to 4.9% in 2015Q2 on an average. A similar trend is also apparent in the net non-performing financing to capital ratio which decreased from 11.5 percent in 2014Q2 to 9.0% in 2015Q2.
Earnings
Islamic banks and Islamic windows in the PSIFIs member countries maintained comparable rates of return on assets (ROA) and return on equity (ROE) during the periods under report. Overall, the ROA and ROE were 1.3% and 8.6% in 2015Q2 as compared to 0.9% and 8.9% in 2014Q2 respectively.
Liquidity
On the liquidity indicators, the liquid assets ratio (liquid assets to total assets) and liquid assets to short-term liabilities ratio improved over the period from 24.7% and 12.7% in 2014Q2 to 35.8% and 13.6% in 2015Q2 respectively. Three PSIFIs member countries also started the reporting of Liquidity Coverage Ratio (LCR) which 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 169 and 86 in 2015Q2 as compared to 163 and 86 in 2014Q2 respectively. At the end of 2015Q2, a total of 385,612 staff members were working in 29,148 branches of full-fledged Islamic banks, an increase from 1,466 branches and 29,029 staff over the year from 2014Q2.
The first set of PSIFIs data was released on 27 April 2015 covering the period of December 2013. The second set of data released on 24 November 2015, included the indicators for the four quarters of 2014, with necessary adjustments and revisions to the earlier data set.
