Karim Madad

The Islamic banking industry of Pakistan continued to make progress as shares of assets in the overall banking system increased to 18.6 percent in 2021 from a low level of 0.5 percent in 2003, WealthPK reports.

According to a report of the Finance Minister, the efforts undertaken in the 1980s in Pakistan to Islamise the economy at the comprehensive national level are considered as pioneering work in the Muslim world.

The report, highlighting 75 years of the economic journey of Pakistan, said that the first licence for Islamic banking in the country was issued in January 2002. The first Islamic bank in the country started full-fledged operation in March 2002.

The report said that the Islamic banking industry of Pakistan continued to make progress over the years. Shares of assets in the overall banking system increased to 18.6 percent in 2021 from a low level of 0.5 percent in 2003. The same increasing trend in shares of deposits was recorded 19.4 percent in 2021 as compared to 0.4 percent in 2003.

The report said that the third-year strategic plan for the Islamic banking industry set headline targets for the sector to be achieved by 2025. The targets include 30 percent share in both assets and deposits of overall banking industry, 35 percent share in the bank branch network of the overall banking industry and 10 percent and eight percent share of small and medium enterprises and agriculture.

Islamic banks, while functioning within the framework of Shariah, can perform a crucial task of resource mobilisation, their efficient allocation on the basis of profit and loss sharing (PLS) like Musharaka and Mudaraba and non-PLS bases such as trading and leasing and strengthening the payments systems to contribute significantly to economic growth and development.

Islamic banking has been defined as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Shariah.

According to Dr. Ishrat Husain, the former governor of the State Bank of Pakistan, Islam is not a new religion rather it is the same truth that God revealed through all His prophets.

He said that for a fifth of the world’s population, Islam was both a religion and a complete code of life. He said that economic growth was the main transmission channel for development. “Islam does not contradict growth. It promotes sustainable development and growth,” he added.

Dr. Ishrat Hussain that socio-economic justice was the ultimate objective of an Islamic economy. He said that the economic policies that facilitated unhindered flows of international trade, capital and participation in labour flows, removal of non-tariff barriers, flexible regulations and legislation for labour, investment in skill development and technological assimilation and macroeconomic stability were aligned with the economic principles of Islam.

According to the report, steps for Islamisation of the banking and financial system of Pakistan were started in 1977-78. Pakistan was among the three countries in the world that had been trying to implement interest-free banking at the national level. However, being a mammoth task, the switchover plan was implemented in phases, said the report available with WealthPK.

Independent News Pakistan-Wealthpk