Islamic Banking in Pakistan: Emergence, Growth, and Prospects

Islamic Banking in Pakistan: Emergence, Growth, and Prospects

Muhammad Bilal Zafar (Department of Shariah and Economics, University of Malaya, Malaysia) and Ahmad Azam Sulaiman (Department of Shariah and Economics, University of Malaya, Malaysia)
Copyright: © 2020 |Pages: 17
DOI: 10.4018/978-1-7998-1611-9.ch004

Abstract

Since 1960, after a trial of almost 40 years, the reformation of economy of Pakistan from conventional to Islamic could not be achieved. Since 2000, the government changed the strategy to gradually Islamize the economy and adopted a dual system. In this ambit, the State Bank of Pakistan deliberately announced the vision to make the Islamic banking as first choice for users of banking in Pakistan. This chapter bring insights on the background, current state, issues, challenges, and avenues of future policy regarding Islamic banking of Pakistan. The empirical data about Islamic Banking has been collected from the State Bank of Pakistan for the period 2003-2018. This is to evaluate the current state in terms of market performance, modes of Islamic financing, and financing portfolios of Islamic banking. The findings of this chapter show there is a substantial lack of interest by the government to develop the Islamic banking, and Islamic banking is also deviating from its social and ethical proclaims.
Chapter Preview
Top

2. Background Of Islamic Banking In Pakistan

The background of Islamic banking in Pakistan has three main phases (Table 1), first, the political motives behind the foundation of Pakistan, secondly, the role of government in transformation of economic structure into Islamic during year 1960 to 2000, and third phase involves, the government strategy after year 2000, that to move both sectors parallel, conventional and Islamic.

The history of development of Islamic economic structure in Pakistan can be traced in the political movement behind foundation of Pakistan, which carried the ideology of a state where the Muslims can enjoy their lives under the Islamic principles. In 1948, Muhammad Ali Jinnah, the founder and Governor General of Pakistan inaugurated the State Bank of Pakistan and said:

I shall watch with keenness the work of your research organization in evolving banking practices compatible with Islamic idea of social and economic life. 1

Complete Chapter List

Search this Book:
Reset