ICMA conducts SWOT analysis of Islamic banking sector
KARACHI: The Institute of Cost and Management Accountants of Pakistan (ICMA) has conducted a detailed SWOT analysis of Pakistan's Islamic banking sector, highlighting its rapid growth, key challenges, and future potential as the country moves toward full Shariah compliance by 2027.
According to the State Bank of Pakistan (SBP) data for September 2024, Islamic banking assets grew by 17.4% year-on-year to Rs. 9,881 billion. Deposits increased by 23.3% to Rs. 7,596 billion, net financing rose by 7.5% to Rs. 3,252 billion, and investments grew by 22.3% to Rs. 4,803 billion. Islamic banking now represents 19% of the total banking industry's assets and 23.2% of deposits.
Islamic banks have shown greater resilience during economic downturns due to their asset-backed financing model, which provides more stability compared to interest-based conventional banks. A landmark achievement was the Rs. 50 billion (USD 170 million) raised by Lucky Investments Limited in a single day through the IPO of its Lucky Islamic Money Market Fund — the largest Shariah-compliant mutual fund launch in Pakistan's history.
Key Islamic banks such as Meezan Bank, Al Baraka Bank, Faysal Bank, and BankIslami are expanding their branch networks and customer base across the country. These banks enjoy strong public trust by offering a diverse range of Shariah-compliant financial products.
Despite these strengths, the sector faces challenges including a shortage of trained Shariah scholars and Islamic finance professionals, limited public awareness and financial literacy, and gaps in legal and regulatory frameworks for full Shariah implementation. Additionally, product innovation and technology adoption lag behind conventional banks, and Islamic banking penetration remains low in rural areas and among small businesses.
Looking forward, Pakistan's Islamic banking sector has strong growth opportunities. The government's goal of fully Islamizing the banking sector by 2027 will open new markets. Emerging areas such as Islamic fintech, Takaful (Islamic insurance), and Sukuk (Islamic bonds), combined with rising global demand for ethical finance, will support this growth. Strategic partnerships and investments from Gulf and Southeast Asian economies, along with government incentives for Islamic finance development, add further momentum.
However, the sector must navigate threats such as competition from conventional banks offering Islamic windows, potential delays in legal reforms, macroeconomic instability, and global financial regulations that may not align with Islamic banking principles. There is also the risk of reputational damage if Shariah compliance or governance standards are not rigorously maintained.
ICMA stresses that addressing these challenges through stronger regulation, enhanced public education, and faster technological innovation will help Pakistan's Islamic banking sector reach its target of a 30% market share by 2025. This growth is essential to promote financial inclusion and support Pakistan's overall economic development.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
Balochistan needs a development lifeline
EDITORIAL: The Balochistan government has presented a budget with total receipts of Rs1028 billion and expenditures of Rs991 billion, which have been revised downward slightly to achieve a higher cash surplus of Rs51.5 billion. The smallest province by population and the largest by area has utilised its entire development budget of Rs 219 billion for FY25 — a first in the province's history. The development budget for FY26 is proposed at Rs350 billion. The fiscal austerity being pursued by the federal government includes extracting a 'pound of flesh' from the provinces in the form of surpluses — a burden that is taking a heavy toll on Balochistan, the least developed province in the country. Budgetary allocations are primarily based on population size, with only minor adjustments for inverse population density. With a sparse population, Balochistan's budget allocation is perennially low. It's a chicken-and-egg problem. The province needs infrastructure development and investment in social sectors. Due to low population density, the per capita requirement is high. Without adequate spending, growth in the province remains stunted. And with low growth, compounded by a weak law and order situation, there has been little to no immigration from other provinces — in fact, settlers have been leaving Balochistan for years, primarily due to security concerns. To reverse this trend, better economic opportunities for local residents are essential — and for that, higher development spending is required. Balochistan is rich in minerals. Pakistan's political and military leadership sees the country's future success in the extraction of minerals and rare earth metals — most of which are located in Balochistan. Reko Diq is believed to be a game changer for Pakistan. And indeed, the project is finally progressing in the right direction. However, it cannot serve as a harbinger of growth if it develops in isolation, like a fortress in the middle of nowhere. True development lies in building vibrant cities around such projects. That's what's missing — and without it, many other projects will face similar hurdles. In the past, Balochistan also relied on royalties from oil and gas fields, which are now declining due to falling production. New explorations and productions are limited, owing to a range of factors — all of which are tied to the broader issue of development and investment in the province. Historically, gas from Balochistan has largely been used to fuel the rest of the country, with only a small share allocated to the province itself. Other provinces in Pakistan are densely populated and need some degree of population redistribution. Ideally, this would involve incentivising the movement of people to Balochistan — which in turn requires a skilled workforce and private capital investment. And, above all, there is need for a suitable constitutional arrangement with a sunset clause to ensure that the Baloch do not become a minority as regards their share in the provincial or national legislatures. But that cannot happen without an environment that is characterised by good infrastructure, improved security and the needed political sagacity to address their reservations as regards massive influx of people from other provinces. The private sector is unlikely to take the lead. This is the responsibility of the government. And for that, better budgetary allocation is essential. While the federal government is fiscally constrained and seeking additional resources, provinces are expected to generate their own revenues. Better-developed provinces — like Punjab and Sindh — may be positioned to do so. But applying the same expectations to Balochistan creates an uneven playing field. The ongoing Iran-Israel conflict has further heightened Balochistan's strategic importance. This is the right moment for the authorities to seek greater funding — both domestically and from international partners — to enable the development of Balochistan and address the longstanding grievances of its people. Without bringing Balochistan up to pace, sustained economic growth in Pakistan will remain a distant dream. Copyright Business Recorder, 2025
Business Recorder
an hour ago
- Business Recorder
Eco-friendly industries: Minister says investors to be granted tax exemptions
KARACHI: Provincial Minister for Energy, Syed Nasir Hussain Shah, inaugurated the first ENVEREX EV electric car showroom. Muhammad Zakir Ali, CEO of Enverex Industries, Director Abdul Rehman, and other dignitaries were also present. The provincial minister inaugurated the showroom by cutting the ribbon. He inspected the electric vehicles on display. The company's CEO gave a detailed briefing about the vehicles. Information was also provided regarding the after-sales services offered by the company. The electric car charging ports can also be installed at home. Speaking to media on the occasion, Syed Nasir Hussain Shah said, 'Today we have inaugurated the ENVEREX Industries EV showroom. We appreciate the local production of electric vehicles and will fully support it. The cost of running an electric car is Rs. 4 per kilometre.' He stated that, in line with PPP Chairman Bilawal Bhutto Zardari's vision, eco-friendly energy projects are being promoted and supported. Government-owned lands will be utilised for electric charging stations. It has been made mandatory to include electric charging facilities in newly constructed buildings in Sindh. Electric charging stations will be established in major cities across the province. Shah said that for the convenience of travellers, electric charging stations will be set up every 30 to 40 kilometres outside city areas. Special funds are being allocated for eco-friendly projects as per the directions of Chairman Bilawal Bhutto Zardari. The Sindh government is fully supporting and facilitating such eco-friendly initiatives. Efforts will be made to shift more vehicles and bikes to electric power. Copyright Business Recorder, 2025
Business Recorder
an hour ago
- Business Recorder
Illicit cigarettes, raw materials worth Rs648m destroyed
HYDERABAD: In a significant enforcement action, the Regional Tax Office (RTO) Hyderabad and the Directorate of Intelligence & Investigation (I&I) Hyderabad jointly carried out the destruction of non-duty paid cigarettes and raw materials worth Rs 648 million, inclusive of taxes. The destruction activity took place at Indus Hill Top and was attended by senior officials, including Makhno Mahar, Director I&I Hyderabad; Dr Aslam Marri, Coordinator Sindh Balochistan Hub; Naib Ali Pathan, Commissioner Inland Revenue, Zone-I, RTO Hyderabad; Mumtaz Thebo, Additional Director I&I Hyderabad; and members of the IREN Squad of I&I Hyderabad. This consignment, consisting of illicit cigarettes and related manufacturing materials seized during a series of intelligence-based operations conducted between February and June 2025. These raids were carried out under the coordinated efforts of the I&I Hyderabad and the IREN Squad of RTO Hyderabad. Following due legal proceedings, including litigation and adjudication, destruction orders were issued by the competent authorities, paving the way for lawful disposal of the seized contraband. Officials emphasized that the destruction of such non-duty paid goods is a routine part of enforcement activity conducted every few months by RTO Hyderabad and I&I Hyderabad. These operations are aimed at curbing the menace of tax evasion, safeguarding government revenue, and discouraging the sale and distribution of illicit tobacco products in the market. The authorities reiterated their commitment to strict enforcement of tax laws and warned that action will continue against manufacturers, distributors, and retailers involved in the illicit trade of non-duty paid cigarettes. Copyright Business Recorder, 2025
