Page 90 - CMA Journal (Mar-Apr 2025)

SECTOR BRIEF

S B

Islamic Banking Sector in Pakistan

By ICMA Research and Publications Department

Timeline of Pakistan's Islamization Process 2015 – Pakistan issues international Sukuk to boost
Islamic finance.
1949 – Objectives Resolution establishes Islam as
2019 – SECP enforces Shariah Governance Regulations.
supreme constitutional principle
2020 – SBP sets 20% Islamic banking market share
1956 – First constitution declares Pakistan an Islamic
target by 2025
Republic
2021 – Roshan Digital Account adds Islamic banking
1962 – Council of Islamic Ideology (CII) created to
option for overseas Pakistanis
advise on Shariah compliance
2022 – FSC orders complete transition to interest-free
1973 – Current constitution strengthens Islamic banking by 2027
provisions, establishes Shariat benches
2023 – SBP launches Islamic Finance Growth Strategy
1977 – Start of systematic Islamization under
targeting 30% market share
Zia-ul-Haq's regime
2024 – Government issues $1 billion Sukuk for
1979 – Hudood Ordinances introduce Islamic criminal
infrastructure development
penalties
1980 – Federal Shariat Court (FSC) established for Growth and Resilience of Islamic Banking in Pakistan
Islamic legal review Islamic banking in Pakistan is experiencing strong
–
1980 Zakat/Ushr system institutionalized as growth, with major players expanding their branch
compulsory Islamic welfare networks. Meezan Bank leads with 900 branches,
1980 – Islamic banking initiated through profit-loss followed by Al Baraka Bank (775), Faysal Bank (700), Bank
sharing accounts Islami (330), and Dubai Islamic Bank (235). In addition,
several conventional banks operate dedicated Islamic
1985 – Revival of the Islamic Provisions Order (RIPO)
banking divisions.
constitutional amendments introduced
1990 – Shariat Appellate Bench formed in Supreme As of September 2024, the State Bank of Pakistan (SBP)
Court to hear FSC appeals. reported a 17.4% year-on-year increase in Islamic
1991 – Shariat Act makes Quran/Sunnah supreme law banking assets, reaching Rs. 9,881 billion. Deposits grew
by 23.3% to Rs. 7,596 billion, while net financing rose by
1999 – FSC ruling declares interest (riba) un-Islamic
7.5% to Rs. 3,252 billion and investments increased by
(later stayed)
22.3% to Rs. 4,803 billion. Islamic banking now accounts
2002 – Meezan Bank launches as first full Islamic for 19% of the total banking industry’s assets and 23.2%
commercial bank
of deposits.
2002 – State Bank of Pakistan (SBP) establishes Islamic
Islamic banks have also demonstrated greater resilience
Banking Department
during economic downturns, largely due to their
2003 – SBP Shariah Board formed for Islamic finance
asset-backed financing model, which offers more stability
oversight
compared to interest-based conventional banking. A
2005 – BankIslami begins operations as Islamic bank notable milestone was achieved when Lucky Investments
2006 – Dubai Islamic Bank Pakistan was established Limited raised Rs. 50 billion (USD 170 million) in a single
2008 – SBP adopts AAOIFI standards for Islamic day through the IPO of its Lucky Islamic Money Market
banking. Fund — the largest Shariah-compliant mutual fund
launch in Pakistan’s history.
2013 – SECP introduces Islamic capital market framework.

88 ICMA’s Chartered Management Accountant, Mar-Apr 2025