Islamic banking has emerged as a major pillar of Pakistan’s financial system, securing a quarter of the industry’s share in just two decades, according to former State Bank of Pakistan (SBP) governor Ishrat Husain. Speaking at a book launch and storytelling session on Meezan Bank titled “Unconventional – The Bank No One Saw Coming,” Husain reflected on the transformative journey of Shariah-compliant banking in the country.
He noted that two decades ago, Islamic banking had virtually no share in Pakistan’s financial system. Today, however, its presence accounts for 25 percent of the overall banking industry. This growth, he emphasized, has been driven by businesses and individuals who previously avoided conventional banks due to religious concerns, but have now found confidence in Islamic finance.
“Islamic banking has mobilized savings and encouraged national investment, contributing positively to the overall economy,” Husain said. He added that the sector’s potential goes far beyond serving faith-based needs, offering a pathway toward inclusive growth and social equity.
According to Husain, Islamic finance can play a vital role in driving financial inclusion, alleviating poverty, supporting farmers and entrepreneurs, and investing in human capital. He suggested that it can also provide affordable housing, improve income distribution, and promote balanced development. Contrasting it with other global systems, he remarked: “Unlike capitalism that often leaves marginalized people behind or socialism that collapses under its own weight, Islamic finance offers a balanced path, combining efficiency with equity, and growth with justice.”
At the same event, SBP deputy governor Saleem Ullah shed light on the roadmap for Pakistan’s banking sector, noting that the industry could fully convert to Islamic banking by December 2027, in line with the Federal Shariat Court’s deadline. “The Shariah-compliant banking journey is gaining traction satisfactorily. It is on the way,” he said.
On the regulatory side, Ullah reassured that the central bank remains committed to ensuring a conducive environment for Islamic finance. “We would love that this growth should remain demand-driven. The value propositions should pull even conventional mindset towards Islamic financing and Islamic banking services. We are fully committed and we are positive that the regulatory and legal framework would remain supportive,” he added.
The session also carried an announcement from Irfan Siddiqui, CEO of Meezan Bank, who confirmed he would retire from his position in December 2025 upon reaching the age of 70. His deputy, Syed Amir Ali, is set to take charge as the next CEO.
Industry observers note that Meezan Bank, as Pakistan’s first and largest Islamic bank, has been a driving force in popularizing Shariah-compliant financial solutions across the country. Its success story is often cited as a model for other institutions seeking to enter the Islamic finance space.
The growth trajectory of Islamic banking, coupled with the government’s target for full conversion within the next two years, points to a fundamental shift in the financial landscape of Pakistan. The increasing adoption of Islamic finance is not only reshaping banking practices but also positioning the country as a key player in the global Islamic finance industry.
Follow the PakBanker Whatsapp Channel for updated across Pakistan’s banking ecosystem.