Islamic Banking in Pakistan: Legal Framework, Challenges and Growth Prospects

Abstract

This research paper suggests that Islamic Banking is spreading its wings in Pakistan and is positioning itself for growth. Islamic banking in Pakistan is also facing challenges because conventional banking in the country is more penetrative and holds a larger share of the economy. A qualitative study was conducted by sending questionnaires to 15 banking and non-banking professionals in our network holding middle to top management positions. Also, six in-depth interviews were carried out during July - August 2010. Three interviews were made with Islamic bankers holding middle management positions in three different Islamic banks, and three detailed discussions were made with customers of those three other banks. Questions asked during the interview were based on the basics of Islamic banking, challenges faced, distinguishing features, comparison with conventional banking, product and market development, challenges faced, and future growth. Through both ways of qualitative research (i.e., questionnaire and detailed interview), it is extracted that Islamic banking in Pakistan is positioned for growth since the Muslim community in our society is eager to know more about it and want to spend their lives in the light of Islamic preaching and fundamentals of religion. The need is, however, felt to arrange a platform to increase and share the knowledge base in our country, increase awareness, introduce new products as per the need and requirement of the society, and introduce courses and programs in all colleges, Universities, and Business Schools to familiar students about Islamic banking so that their learning curve built before they enter in the job market and finally improve quality of the human resources particularly those working in Islamic Banks.