Samba Bank Limited has taken a step toward transforming into a full-fledged Islamic bank, as its board has granted in-principle approval for the conversion from conventional banking.
“The Board of Samba Bank Limited has, in principle, approved the plan to convert from Conventional to Islamic Bank,” the bank said in a regulatory filing to the Pakistan Stock Exchange (PSX) on Thursday.
The bank stated that it will now submit a tentative plan to the State Bank of Pakistan for approval.
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However, right after the announcement, Samba’s share price fell by 5.56% and was trading at Rs8.49 as of 01:19 pm, reflecting a decline of Rs0.50 from the previous session. The market reaction suggests investor uncertainty over the bank’s transition plan.
Samba Bank’s move reflects the growing trend among financial institutions in Pakistan, shifting towards Shariah-compliant banking models. According to the State Bank of Pakistan (SBP), Islamic banking is defined as a banking system that is in consonance with the spirit, ethos, and value system of Islam and governed by the principles laid down by Islamic Shariah.
Islamic banking, the more general term, is based not only on avoiding interest-based transactions prohibited in Islamic Shariah but also on avoiding unethical and unsocial practices.
Last month, the Bank of Khyber announced to initiate the process of converting from a conventional bank to a fully Islamic financial institution.
SBP data shows that the assets of the Islamic banking industry increased by Rs192 billion during the quarter ending September 2024, reaching a total of Rs9,881 billion. Similarly, deposits continued to grow, rising by Rs233 billion over the same period to Rs7,596 billion.
On a year-on-year (YoY) basis, the Islamic banking industry recorded a 17.4% growth in assets and a 23.3% increase in deposits. The share of Islamic banking in the overall banking industry improved slightly from the previous quarter, reaching 19% in total assets and 23.2% in deposits.
