Pakistan’s Islamic banking sector continued to strengthen its position within the national financial system during 2025, with total assets reaching Rs14.467 trillion and the sector’s share of the banking industry rising to nearly 23 percent, according to the State Bank of Pakistan. The SBP’s Islamic Banking Bulletin highlighted that financing from Islamic Banking Institutions now accounts for approximately 38 percent of total banking sector lending, reflecting sustained demand for Shariah-compliant financial products.
Islamic banking assets grew by Rs3.4 trillion over the year, up from Rs11.070 trillion in December 2024, driven primarily by a surge in financing activity. The sector’s net financing portfolio expanded by nearly 40 percent, reaching Rs5.654 trillion, while net investments grew 32.4 percent to Rs6.605 trillion by year-end. The growth reflects both strong consumer demand and increasing institutional adoption of Islamic financial solutions.
The overall market share of Islamic banking assets stood at 22.9 percent, while deposits accounted for 27.8 percent of the banking system. Islamic financing contributed 38.1 percent to total lending, and investments represented 16.9 percent of the sector’s holdings. An analysis of the asset structure showed that net financing constituted 39.1 percent of total Islamic banking assets, while net investments made up 45.7 percent.
Total deposits in Islamic banking institutions rose to Rs11.037 trillion, increasing by Rs3.132 trillion in 2025. Current and savings accounts remained the primary sources of deposits, with current accounts totaling Rs4,577 billion and savings accounts reaching Rs4,008 billion. Current deposits rose by Rs387 billion, while savings deposits grew by Rs266 billion. Fixed deposits also saw a notable increase of Rs186 billion over the year.
Within the deposit base, full-fledged Islamic banks accounted for 56.7 percent, while Islamic banking branches of conventional banks contributed 43.3 percent. Investment growth was largely supported by allocations in government Ijarah Sukuk, reflecting continued investor confidence in Shariah-compliant instruments. Islamic banking branches of conventional banks increased net investments by Rs1 trillion to reach Rs2.686 trillion, while full-fledged Islamic banks added Rs609 billion, bringing their net investments to Rs3.919 trillion. Islamic banks now hold 59.3 percent of total net investments, with Islamic banking branches making up 40.7 percent.
Despite the sector’s robust growth in assets, financing, and deposits, profitability declined during the year. Profit before tax for the Islamic banking sector fell to Rs420 billion in 2025 from Rs497 billion in 2024, highlighting challenges in maintaining margins amid rising costs and competitive pressures.
Overall, the data from the SBP demonstrates that Pakistan’s Islamic banking sector is increasingly integral to the country’s financial system. The sector’s expansion reflects growing adoption of Shariah-compliant financing and investment products, strong deposit mobilization, and increased market penetration, even as profitability faces headwinds in a challenging economic environment. The sector’s development signals both opportunities and potential areas for operational optimization as Islamic banks continue to expand their footprint nationwide.
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