Karachi, The Pakistan Kuwait Investment Company (Pvt.) Limited (PKIC), a leading Development Financial Institution (DFI) in Pakistan, has taken significant steps towards expanding its Islamic finance offerings, including the establishment of an Islamic digital bank, which is set to transform the country's banking landscape.
According to The Pakistan Credit Rating Agency Limited, PKIC has received in-principle approval to set up the Raqami Islamic Digital Bank Limited (RIDBL), with a controlling equity stake of approximately 72.9%. This move is part of PKIC's broader strategy to offer a diverse array of Sharia-compliant financial products. The company’s initiative is bolstered by its strategic investment in Meezan Bank Limited, Pakistan’s leading Islamic Bank, from which it garnered a substantial dividend income of PKR 8.3 billion, contributing to a profitability surge to PKR 10 billion in CY23.
PKIC's financial operations in CY23 demonstrated robust liquidity management, benefiting significantly from treasury operations amid high-interest rates. However, recent challenges in the market have prompted a strategic shift toward investments in floater rate Pakistan Investment Bonds (PIBs) and the maturity of T-bills, aiming to mitigate interest rate risks and stabilize net interest margins (NIMs).
The company's corporate finance portfolio stood at PKR 62.8 billion in CY23, disbursed to well-established and stable entities, reflected in a minimal infection ratio of 1.5% and non-performing loans (NPLs) totaling PKR 809.2 million. PKIC has developed a credit risk model that effectively segregates sector-wise and borrower-wise risks to enhance asset quality.
Significantly, PKIC's asset base crossed the trillion mark in CY23, reaching PKR 1.08 trillion, up from PKR 765 billion at the end of the previous year. Its funding primarily derives from the Open Market Operation (OMO) facility, with minimal reliance on Certificates of Investment (COIs). The firm also maintains a strong equity base of PKR 34.3 billion and a capital adequacy ratio (CAR) of 39.1%, underscoring its robust risk absorption capacity.
The success of PKIC's new ventures and strategic investments is deemed crucial for the sustainability and profitability of the company, with ongoing management efforts focused on diversifying operations and identifying new growth niches. The ratings assigned to PKIC are contingent upon its management's continued effectiveness in sustaining its financial profile and managing associated risks.