KARACHI, April 25: The growth of Islamic Finance Services Industry (IFSI) has consistently outpaced that of the conventional banking both domestically and globally while it maintained its growth trajectory during the last quarter of CY2010 despite serious challenges to the economy. The State Bank in its latest Islamic Banking Bulletin reported that the IFSI had shown resilience during the current global financial markets turmoil that triggered trillions of dollars losses and comparable bailout packages in the conventional financial markets worldwide.

“The asset based nature of IFSI and prohibition from acquiring speculative positions in the assets markets act as shock absorber in the first round of any financial crises,” said the bulletin.

The centuries-old conventional banking has yet not emerged from the crisis that encircled the entire globe from the mid of 2007.

Bankers were of the view that since the Islamic financial services were comparably very small, the impact of crisis was invisible. However, the Islamic bankers said the banking was asset based which saved it from shocks.

The SBP report said there were inherent benefits besides excessive liquidity of Middle East region that had attracted the conventional financial markets stalwarts and international financial hubs to start taking IFSI seriously.

“So much so that the United Kingdom, Singapore and some other non-Muslim countries are even amending their laws and regulations to accommodate IFSI in their respective jurisdictions,” said the SBP Bulletin.

The investment and financing activity recorded a big surge during the last quarter of calendar year 2010 with 96 per cent and 18 per cent growth respectively on quarter-to-quarter basis.

The Bulletin reported that the year-on-year growth in investments and financing was 144 per cent and 33 per cent respectively as they increased to Rs58 billion and Rs180 billion respectively in December 2010 from Rs72 billion and Rs153bn in December 2009.

In Pakistan, the assets of the Islamic banking industry have increased to Rs477 billion, which translates into 6.7 per cent market share posting an increase of 30.2 per cent on year-on-year basis.