Role of Pakistan in the growth of Islamic Banking.

Byline: S. KAMAL HAYDER KAZMI

For the development and growth of Islamic finance, the government of Pakistan is one of the frontline countries playing an active and effective role. In the country the State Bank of Pakistan (SBP) established a dedicated Islamic banking department and Shariah board to approve and monitor the principles for Islamic banks.

International studies recorded that the significance of banking system in the economic growth of a country can be done by productive investment in country. It is said that Islamic banking assists in overcoming short falling and gives an optimistic boost to economy to upward and increase a society to self-sufficiency economy by equal income distribution. Furthermore, Islamic banking has an optimistic impact on economic development as it leads toward progress. Islamic banking also offers income distribution equally and provide cash to the poorest class of society by social justice, and in Islamic banking system there is no assurance of profit.

Islamic banking operations are directly affected through the success or failure of customer's operation. The association between customer and bank is that of partnership, and return will be shared between both depositor and banker. Loss also shared by both parties. This sharing principle is completely dissimilar from conventional banking system. It launches the idea of sharing and offer an incentive for depositor to utilize the finance in a better way and get maximum return on its investment.

The emergence of Islamic finance across worldwide markets has gained the attention of various international financial institutions such as the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB). They now acknowledge Islamic finance for its sustainable and ethically responsible nature. These organizations no doubt, have realised that Islamic finance has the potential to assist in problems like poverty elimination and boosting prosperity in developing states. The global Islamic finance industry identified resilience during the pandemic.

According to the Islamic Corporation for the Development of Private Sector (ICD) of the Islamic Development Bank Group Refinitive Islamic finance development report 2022, the total Islamic finance assets boosted to $4 trillion with a 17 percent annual growth rate. The global Islamic banking sector grew by 17 percent to $$2.8 trillion. SandP Global Ratings expects stronger economic growth in core Islamic...