islamic finance in national accounts- palestine
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Islamic Finance in National Accounts- Palestine
Amina Khasib
Banks in Palestine
All Banks in Palestine 2016
Conventional Banks
15 Banks
304 Branches
622 ATM
Islamic Banks
3 Banks
46 Branches
98ATM
15%
16%
Performance of Islamic Banks
8% 9% 10% 11% 12%
34% 36% 38%41% 41%
58%55%
52%48% 47%
0%
10%
20%
30%
40%
50%
60%
70%
2012 2013 2014 2015 2016
Islamic Banks National Banks Arab&Foreign Banks
Total Assets
Performance of Islamic Banks
Direct Credit Facilities- Net
9% 11% 12% 13% 14%
39% 41% 42% 44% 46%
52%48% 46% 43%
40%
0%
10%
20%
30%
40%
50%
60%
2012 2013 2014 2015 2016
Islamic Banks National Banks Arab&Foreign Banks
49% of Total
Assets
Performance of Islamic Banks
Customers’ Deposits
9% 9% 10% 11% 12%
32% 34% 38% 40% 40%
59% 57% 52% 49% 48%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016
Islamic Banks National Banks Arab&Foreign Banks
Performance of Islamic Banks 2009, 2016
Total Assets
0.6 billion
1.7 billion
Shareholders' Equity
86 million
243 million
Net Income Before Tax
3 million
23million
Performance of Islamic Banks compared with Jordan
Share of Islamic Banks from Total Assets
Palestine10.8%
Jordan15.1%
Islamic Banks’ share of the Market
10% 10%
12%
8%
9%
11%11%
13%
11%
10%
12%12%
14%
11%
15%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Net assets Customers'
Deposits
Credit facilities Net Income Shareholders'
Equity
2014 2015 2016
Uses Of Funds…Types
86.0%
5.1%
3.7%0.1% 3.7% 1.4%
Murabaha (Mark up)
Mudarabah (Profitsharing)
I Jar All (Leasing)
Qard-E-Hasan(Interest-Free Loans)
Estisna'
others
Uses Of Funds…Sectors
Public Sector,
30%
Agriculture,
1%Manufacture,
6%Real Estate &
Land, 26%Trade, 11%
services, 2%
Consumption,
1%
Tourism,
Hotels and
Resturants, 2%
Other, 21%
Measurement of Output for Islamic Banks
National Accounts
• Annual Survey for financial intermediation and Insurance (1994-2016).
• All enterprises engaged in the activities classified under category K according to ISIC,4 including money exchangers.
• # of financial intermediation enterprises and insurance enterprises was 53 enterprises and holding companies (Establishment census 2012).
• Money exchangers sample size is 122 enterprises.
Finance and Insurance Survey
Banking activity
# of enterprises and employed persons
Compensation of employees
Fixed Assets in financial Intermediation enterprises
Output for Principal and secondary activities for financial enterprises
Production Inputs and Investments in financial and real assets
Finance and Insurance Survey
Banking activity
Finance & Insurance
Report
Conventional Banks Islamic Banks
• FISIM is calculated only on Loans and Deposits- like instruments
• FISIM formula applied independently to each side✓ Borrowers: Implicit
services to borrowers= (rL-rr)× Loans
✓ Depositors: Implicit services to depositors= = (rD- rr)×Deposits
• FISIM= (rL- rr)× Loans + (rD-rr)× Deposits
FISIM (SNA 2008)
• Equivalent terms are Financings and Funding
• Returns on financings (rFin) substitute rL
• Distribution of Profits to depositors/ investors (rFund) substitute Rd
• FISIM= (rFin –rr)×Financing+ (rFund –rr)× Funding
Qu banks2016.docx
Finance and Insurance Survey
Questionnaire
Finance & Insurance
Report
69%
21%
10%
Output of Islamic Banks 2016
FISIM
Commissions
MoneyExchange
Total Output of
IB is 10% of total
Output
Challenges for Islamic Finance
• Large share of clients do not know about the services offered by Islamic Banks, they don’t know the meaning of Murabaha, Mudarabah and Musharaka.
• Majority of people are unware of the difference between Islamic Banks and Conventional Banks (only the name).
• Islamic banks succeeded in attracting deposits, but were not able to channel them into long term investment: invested mainly in Murabaha (short term investment) which is low- risk method and provide rapid returns (Cash)
Challenges for Islamic Finance
• Other methods (Musharaka and Mudarabah) are highly risk, and not all firms want to give up part of their profits to their Partner (Islamic Bank).
• Islamic banks still play a minor role in the Palestinian Economy. Their assets represent less than half the percentage of total banks assets, and 10% of total branches.
• The Sharia Control Committee of Islamic banks should include consultants in the field of finance to give Fatwa based on understanding banking concepts.