Islamic banking has firmly established its position in Pakistan’s financial ecosystem, now accounting for one-fourth of the nation’s total banking industry, according to former State Bank of Pakistan (SBP) governor Ishrat Husain. Speaking at the launch of the book “Unconventional – The Bank No One Saw Coming,” which chronicles the story of Meezan Bank, Husain credited the rise of Islamic finance for transforming Pakistan’s financial landscape and expanding access to faith-based banking solutions.
He noted that the journey of Islamic banking in Pakistan has been remarkable, growing from virtually zero presence two decades ago to capturing 25% of the market share today. “Many businesses that once avoided conventional banking due to religious conviction have found a home in Islamic finance,” Husain said. “The system has mobilised domestic savings, boosted national investment, and contributed positively to the overall economy.”
Highlighting the broader impact of the sector, the former central bank chief stated that Islamic finance can play a crucial role in achieving equitable economic growth. “Islamic banking has the potential to drive financial inclusion, alleviate poverty, support farmers and entrepreneurs, and invest in human capital,” he explained. “It can enable affordable housing, promote fair income distribution, and ensure inclusive development.”
He described Islamic finance as a balanced economic model that blends the strengths of both capitalism and socialism while avoiding their pitfalls. “Unlike capitalism that often leaves marginalized groups behind or socialism that collapses under inefficiency, Islamic finance provides a balanced path that combines efficiency with equity, and growth with justice,” Husain added.
In the same session, SBP Deputy Governor Saleem Ullah reaffirmed the central bank’s commitment to transitioning Pakistan’s banking sector toward complete Islamic banking by December 2027. The deadline aligns with the Federal Shariat Court’s directive to eliminate interest-based banking from the country. “The journey toward a fully Shariah-compliant banking system is progressing satisfactorily,” he said. “We are confident that the momentum will continue as institutions and customers increasingly recognize the value of Islamic banking.”
He further assured that the SBP will continue to collaborate closely with financial institutions to create an enabling regulatory environment for the Islamic finance industry. “We want this growth to remain demand-driven,” Saleem Ullah emphasized. “The value propositions of Islamic banking should attract even those accustomed to conventional banking. Our goal is to ensure that the regulatory and legal framework stays robust and supportive of this transformation.”
At the same event, Meezan Bank CEO Irfan Siddiqui announced his retirement, which will take effect in December 2025 when he turns 70. He shared that Deputy CEO Syed Amir Ali would take over leadership of the institution. Meezan Bank, Pakistan’s first and largest Islamic bank, has been a major driving force behind the expansion of Islamic finance in the country, setting benchmarks for Shariah-compliant banking practices and digital innovation.
Industry observers believe that the continued expansion of Islamic banking will not only promote financial inclusion but also strengthen the stability and diversity of Pakistan’s financial system. With rising consumer trust and active regulatory support, the sector appears poised for sustained growth in the coming years.
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