Islamic Banking in Pakistan: Emergence, Growth, and Prospects

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.