Pakistan

Islamic finance industry is a fast-growing segment of global financial system. But the challenges that post-Soviet countries, authorities and firms face in the adoption of Islamic finance practices in their jurisdictions are mainly due to the scarce awareness of obvious examples and benchmarks. In this regard, the current study is devoted to the analysis of the transition to an interest-free financial system in Pakistan. We analyze the history and current state of the Islamic finance industry in Pakistan based on the evidence obtained from the secondary sources. Data were gathered using the qualitative method of systematic literature review technique. While the theoretical corpus was formed from the fundamental works of I. Warde, F. Baqir et al., the main empirical data was obtained from Islamic Banking Bulletins and International Islamic Financial Market reports from 2006 to 2024. The initial corpus was then significantly expanded by means of content analysis of open media sources and reports of consulting companies. Thus, our study attempts to synthesize all existing literature on the Islamic finance industry of Pakistan published in the past decades. This study illustrates: (i) the history of the Islamic finance in Pakistan starting from Mawdudi doctrine and its practical implementations; (ii) the problems of the first attempts to Islamize banking sector in 1980s when bankers tended to avoid the key Islamic finance principle of profit and loss sharing. This widely used practice, when bankers took existing interest-based products and introduced minor cosmetic changes to make them Sharia-compliant, reduced their economic value. This mark-up-based Islamic finance practice was soon forbidden; (iii) the most common Islamic banking instruments of the present stage are already equity-based, sukuk market is liberalizing for individual investors and developing on government dire needs on capital. As a result, the share of Islamic banking has grown from less than 1 to 20%, sukuk – to 13%. This study discusses the following reasons to reform the financial system towards Islamic finance: (i) close ties with Gulf countries; (ii) China-Pakistan Economic Corridor that can completely transform the previous regional ties, and the possible financing by sukuk; (iii) huge domestic market supported by dynamic demography of highly religious Pakistani society; (iv) perspectives to cover by formal Islamic banking services of currently 80% informal small and medium businesses, farmers and the population; (v) thousands of Islamic finance professionals. Despite high expectations and elite antagonism, 90% of Pakistanis believed that Islamic finance has a bright future in Pakistan

Corporate Finance · Doctrine · Face (sociological concept) · Financial services · Islam · Islamic banking · Islamic finance · Profit (economics) · State (computer science) · Islamic Finance and Banking Studies · Linguistic, Cultural, and Literary Studies · Socioeconomic Development in MENA

• The Influence of Mawdūd?'s Thought on Muslims in Southeast Asia

  Open Access•Mohd Kamal Hassan•The Muslim World•2003

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• Mawdūd?'s Contribution to the Development of Modern Islamic Thinking in the Arabic‐Speaking World

  Open Access•Fathi Osman•The Muslim World•2003

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• Islamic Banking in Practice

  Open Access•Peter A Cornelisse, Wouter Steffelaar•Development and Change•1995

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