Page 50 - CMA Journal (Mar-Apr 2025)

Contributions of Islamization to Pakistan’s
Focus Section

Economic Growth

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The Islamization of Pakistan’s economy has been a infrastructure and e and
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recurring theme in its political and legal discourse since energy. The
r
ecurring
independence. Rooted in the Objectives Resolution of issuance of sukuk
1949, which declared that future legislation must (Islamic bonds),
conform to Islamic injunctions, economic Islamization including a $1
aims to establish a financial system based on justice (adl), billion sovereign
the prohibition of riba (interest), and equitable wealth sukuk in 2022,
distribution (Chawla & Riaz-ul-Huda, 2015). Over the enhanced foreign
decades, Pakistan has witnessed a blend of state-driven, direct investment
judicial, and institutional initiatives to realize this vision. (FDI) and
However, it gained momentum in the late 1970s during diversified funding
the regime of General Zia-ul-Haq, who sought to align sources (Islamic Muhammad Ahmed, ACMA
economic practices with Islamic principles such as equity, Banking Bulletin, Senior Executive,
social justice, and ethical finance. While the process faced 2023). Attock Petroleum Ltd. and
Vice Chairman, ICMA Faisalabad
structural and political challenges, it also generated Branch Council (FBC)
notable positive outcomes, particularly in promoting 3) Innovation in
financial innovation, enhancing social welfare, and Financial Products
positioning Pakistan within the global Islamic economy. Islamic finance introduced ethical instruments
such as murabaha (cost-plus financing), Ijara
Constructive Contributions
(leasing), and mudaraba (profit-sharing), reducing
of Islamization in Pakistan
reliance on interest-based transactions. These
1) Development of a Parallel Financial System products catered to religiously conscious investors
and supported small and medium enterprises
Islamization spurred the establishment of a robust (Shahariman et al., 2024).
Islamic banking sector, which now constitutes 18%
of Pakistan’s total banking assets (State Bank of 4) Poverty Alleviation Mechanisms
Pakistan, 2023). Institutions like Meezan Bank and
The Zakat and Ushr Ordinance (1980) institutionalized
Bank Islami pioneered Sharia-compliant products,
a nationwide system for collecting and distributing
promoting financial inclusion and attracting both
alms. According to a recent study, Pakistanis are
domestic and international investors.
estimated to contribute over Rs. 619 billion in zakat
2) Global Recognition and FDI annually. In 2024, the average zakat contributor paid
around Rs. 15,000, with over 50 million Pakistanis
Pakistan’s Islamic finance framework aligned the participating in this religious obligation
country with global hubs like Malaysia and the UAE, (Tribune.com.pk).
enabling partnerships in sectors such as
5) Empowerment Through Microfinance
Islamic microfinance institutions, such as the
Akhuwat Foundation, utilized interest-free loans
(qard al-hasan) to uplift marginalized communities.
With a repayment rate of 99.8%, these initiatives
reduced rural poverty and empowered women
entrepreneurs (Akhuwat Annual Report, 2022).
6) Promotion of Equity and Fair Trade
Islamization emphasized risk-sharing and prohibited
exploitative practices, developing a culture of ethical
entrepreneurship. For example, Islamic principles
guided the development of fair-trade supply chains in
agriculture, benefiting farmers in Pakistan (Haq, 2020).
48 ICMA’s Chartered Management Accountant, Mar-Apr 2025