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Islamic Banking in Pakistan: A Critical Analysis


  • Shaikh, Salman


Islamic banking in Pakistan has completed one decade of operations in Pakistan and now there are 5 full-fledged Islamic banks and more than 15 conventional banks with Islamic banking windows. Due to the consistent double digit growth in total assets, the market share had steadily risen to 7% by the end of 2011. However, meaningful assessment of Islamic banking requires looking at how far they have contributed to uphold Islamic principles, values and bringing about or at least working towards equitable distribution of income. But, Islamic banking industry continues to use debt based financing modes which are priced using KIBOR as the benchmark. Equivalence of means test confirms that Islamic banking spreads are higher than conventional interest rate spreads. The paper analyzes the Islamic banking philosophy, principles and practices and identifies the shortcomings which need attention of Islamic scholars as well as the regulators.

Suggested Citation

  • Shaikh, Salman, 2012. "Islamic Banking in Pakistan: A Critical Analysis," MPRA Paper 42497, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42497

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    References listed on IDEAS

    1. Imran Tahir & Mark Brimble, 2011. "Islamic investment behaviour," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 4(2), pages 116-130, June.
    2. Abbas Mirakhor & Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 91/88, International Monetary Fund.
    3. Adel Ahmed, 2010. "Global financial crisis: an Islamic finance perspective," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 3(4), pages 306-320, November.
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    More about this item


    Islamic Finance; Islamic Banking; Takaful; Murabaha; Ijarah; Mudarabah; Musharakah; Salam; Istisna;

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches

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