Tuesday , June 6 2023

Islamic Finance Industry in Pakistan: An Overview of Banking Practices

Islamic banking has been gaining popularity in Pakistan over the last few decades, and there are now a number of Islamic banks operating in the country. Islamic banking operates on the principles of Shariah law, which prohibits the charging or paying of interest, and instead focuses on profit-sharing arrangements and asset-backed financing.

In Pakistan, the State Bank of Pakistan (SBP) has been promoting Islamic banking as a viable alternative to conventional banking. The SBP has issued regulations and guidelines for Islamic banking operations, and has set up a separate department to oversee and regulate the sector.

Currently, there are five full-fledged Islamic banks operating in Pakistan, as well as a number of conventional banks that offer Islamic banking services through dedicated Islamic banking branches or windows. In addition, there are a number of Islamic microfinance institutions operating in the country.

Islamic banking has been growing rapidly in Pakistan, with total Islamic banking assets in the country reaching over PKR 3.7 trillion (approximately USD 23 billion) by the end of June 2021. The growth of the sector has been driven by increasing demand for Shariah-compliant financial products and services, as well as a favorable regulatory environment.

Overall, the Islamic banking sector in Pakistan is expected to continue to grow in the coming years, driven by increasing demand for Shariah-compliant financial products, favorable government policies, and a growing awareness of the benefits of Islamic finance.

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