Islamic Finance in National Accounts- Palestine. Amina Khasib

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1 Islamic Finance in National Accounts- Palestine Amina Khasib

2 Banks in Palestine All Banks in Palestine 2016 Conventional Banks Islamic Banks 15 Banks 304 Branches 622 ATM 3 Banks 46 Branches 15% 16% ATM 98

3 Performance of Islamic Banks 70% Total Assets 60% 50% 40% 34% 58% 36% 55% 38% 52% 48% 47% 41% 41% 30% 20% 10% 0% 8% 9% 10% 11% 12% Islamic Banks National Banks Arab&Foreign Banks

4 Performance of Islamic Banks Direct Credit Facilities- Net 60% 50% 40% 52% 39% 48% 46% 41% 42% 44% 43% 46% 49% of Total Assets 40% 30% 20% 10% 9% 11% 12% 13% 14% 0% Islamic Banks National Banks Arab&Foreign Banks

5 Performance of Islamic Banks 100% Customers Deposits 80% 60% 40% 20% 0% 59% 57% 52% 49% 48% 32% 34% 38% 40% 40% 9% 9% 10% 11% 12% Islamic Banks National Banks Arab&Foreign Banks

6 Performance of Islamic Banks 2009, billion 243 million 23million 0.6 billion 86 million 3 million Total Assets Shareholders' Equity Net Income Before Tax

7 Performance of Islamic Banks compared with Jordan Jordan 15.1% Palestine 10.8% Share of Islamic Banks from Total Assets

8 Islamic Banks share of the Market 16.0% 14.0% 12.0% 10.0% 8.0% 12% 12% 11% 11% 10% 10% 14% 13% 12% 8% 11% 11% 9% 10% 15% 6.0% 4.0% 2.0% 0.0% Net assets Customers' Deposits Credit facilities Net Income Shareholders' Equity

9 Uses Of Funds Types 3.7% 0.1% 3.7% 1.4% Murabaha (Mark up) 5.1% Mudarabah (Profit sharing) I Jar All (Leasing) Qard-E-Hasan (Interest-Free Loans) Estisna' 86.0% others

10 Uses Of Funds Sectors Tourism, Hotels and Resturants, 2% Consumption, 1% services, 2% Trade, 11% Other, 21% Real Estate & Land, 26% Public Sector, 30% Agriculture, 1% Manufacture, 6%

11 Measurement of Output for Islamic Banks National Accounts

12 Finance and Insurance Survey Banking activity Annual Survey for financial intermediation and Insurance ( ). 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.

13 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

14 Finance & Insurance Report

15 Finance and Insurance Survey Questionnaire

16 FISIM (SNA 2008) Conventional Banks FISIM is calculated only on Loans and Deposits- like instruments FISIM formula applied independently to each side Borrowers: Implicit services to borrowers= (rlrr) Loans Depositors: Implicit services to depositors= = (rd- rr) Deposits FISIM= (rl- rr) Loans + (rdrr) Deposits Islamic Banks 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

17 Finance and Insurance Survey Questionnaire

18 Finance & Insurance Report

19 Total Output of IB is 10% of total Output Output of Islamic Banks % 21% FISIM Commissions 69% MoneyExchange

20 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)

21 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.