Page 47 - CMA Journal (Mar-Apr 2025)

Focus Section

The number of Islamic Banking Windows (IBWs) increased Figure 2: Mode Wise Financing (Share in %)
substantially to 2,253 in a year and showed a 17.2% growth
rate year over year. The rising demand for Shariah-compliant
solutions led to this physical business expansion across the
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market .
Table 2: Market Share
Particulars Share in Overall Banking Sector(%)
Dec-23 Dec-24
Assets 19.4 20.6
Deposits 23.2 24.9
Investments (net) 16.3 16.7
Financing (net) 27.4 25.5
Source: Quarterly Islamic Banking Bulletin October-December 2024
Source: Quarterly Islamic Banking Bulletin October-December 2024
The Islamic Banking of Pakistan comprises six pure Islamic
Pakistan's riba-free financial system aims to learn from the
banks and sixteen traditional banks operating standalone
experiences of Iran and Sudan and the financial systems in
Islamic Banking Branches (IBBs). During the last quarter of Malaysia and the GCC nations. The complete
the year, the sector grew substantially in outreach through a
implementation of Islamic banking principles in Iran after
12.8 percent rise in its branch network expansion. The the 1979 revolution provided ideological strength. However,
number of IBBs increased to 6,017 after 684 new branches
economic isolation proved detrimental to innovation
were added throughout the last quarter of 2024. This
because of international sanctions and low integration with
expansion became possible when a major bank strategically world economies. Sudan attempted a similar intervention in
converted all its conventional branch networks within
the 1980s but experienced political turmoil and poor state
Khyber Pakhtunkhwa and Balochistan provinces to Islamic institutions, proving that proper institutional infrastructure
banking branches, resulting in rapid sectoral physical
and financial capabilities are essential for transition success.
expansion. IBBs preserve 132 districts as they expand their
market penetration while continuing their efforts to The dual banking structure of Malaysia, consisting of
promote financial inclusion. The total number of Islamic conventional banking and Islamic banking, has brought a
Banking Windows (IBWs) continued to grow during 2024 practical and enduring solution to the sector through
because they increased to 2,253 positions, which expanded strengthened regulations, financial awareness, and
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Islamic banking service availability across Pakistan . worldwide economic connections. The GCC countries,
especially Saudi Arabia and the UAE, successfully enabled
Islamic finance to work within global banking structures that
remain Shariah compliant through implementing fintech
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and innovation to enhance competitiveness . The diverse
worldwide results demonstrate that Pakistan requires a
multistage method to develop its riba-free finance system
through legal improvements, institutional strengthening,
and worldwide relations.
Pakistan's Riba-Free Future: A Bold Leap
Toward Ethical Finance
The history of Islamic banking in Pakistan dates back several
decades, yet the integration of this system into the national
financial structure has seen rapid growth in recent years. A
fully interest-free economy requires a financial
transformation that is currently underway. Islamic finance
operates through ethical investments, social responsibility,
(Source: Quarterly Islamic Banking Bulletin October-December 2024 )
and risk-sharing models, which fundamentally differ from
Figure 1: Region Wise Branch Network traditional banking practices. The system avoids speculative
The research shows that Diminishing Musharakah is the transactions and opposes excessive profiteering,
principal financial instrument in a riba-free system, establishing financial success by linking it to real economic
constituting 44.8% of the total financing pool. Istisna value. Economic activities under such a system generate
possesses 15.5% of the total financing share, and profits through shared-risk ventures and tangible
Musharakah takes up 12.8%. 26.9% of total financing achievements, rather than interest-based accumulation,
encompasses various Shariah-compliant financing naturally leading to an inclusive and meaningful economic
structures that Islamic Banking Institutions (IBIs) utilize structure. This approach aligns with Islamic doctrines while
strategically per their business fundamentals . offering national security benefits for Pakistan.
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ICMA’s Chartered Management Accountant, Mar-Apr 2025 45