Pakistan is the world’s second-largest Muslim-majority country, and Islamic banking has been gaining popularity in recent years. In 2023, Islamic banking assets in Pakistan reached PKR 7 trillion, up from PKR 3 trillion in 2018. Now Islamic banking in Pakistan around more than 20% of total conventional banks.
There are several factors driving the growth of Islamic banking in Pakistan. First, the government has been supportive of the sector, offering tax breaks and other incentives to Islamic banks. Second, there is a growing demand for Islamic financial products and services from the Pakistani public. This is due to a number of factors, including religious beliefs, the desire for ethical investments, and the perceived advantages of Islamic banking products, such as profit sharing and freedom from interest.
There are a number of Islamic banks operating in Pakistan, including Meezan Bank, faysal Bank Limited, and Islamic Bank of Pakistan. These banks offer a wide range of products and services, including Islamic savings accounts, Islamic credit cards, and Islamic home loans.
Benefits of Islamic banking
Islamic banking offers a number of benefits to customers, including:
Challenges of Islamic banking
Despite its growth, Islamic banking still faces a number of challenges in Pakistan. One challenge is that the sector is relatively new and underdeveloped. This means that there is a shortage of skilled Islamic banking professionals. Another challenge is that Islamic banking products and services are often more expensive than conventional banking products and services. This is because Islamic banks have to incur additional costs to ensure that their products and services are Sharia-compliant.
Second challenge is that Islamic banking could not serve Small and medium enterprises on macro levels for making fair distribution of wealth. Still few Hands are given money of millions people. Which is the against of the objective of Shari’ah and causes concentration of wealth in few hands which forbidden in islam.
The third challenge is that new technologies and techniques are not used to cost cutting, financial inclusion and scaling up consumers trade and businesses. Around 80% of economy is cash economy that could be served through Islamic banking better ways by establishing new ways of Islamic fintech and digital banking, virtual contracts and payment gateways.
Islamic banking is a growing sector in Pakistan, and it is likely to continue to grow in the coming years. The government is supportive of the sector, and there is a growing demand for Islamic financial products and services from the Pakistani public. However, the sector still faces a number of challenges, such as a shortage of skilled professionals and the relatively high cost of Islamic banking products and services.
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