Pakistan is a Muslim country but its financial and banking system is working on conventional basis since its independence in 1947. Several attempts have been made in 1950s and 1980s to convert this system into Islamic, but failed due to several political and administrative reasons. Finally, Supreme Court of Pakistan and Federal Sharia’h Court ordered Federal Government in 1992 to convert whole banking system into Islamic. Meezan Bank was established in 2002 as first full-fledged Islamic bank in the country. After this, several Islamic banks along with Islamic banking divisions and Islamic banking windows of conventional banks were established. The objective of this study is to investigate the reasons of rapid growth of Islamic Banking Industry in Pakistan. For this purpose, statistical data was obtained from Islamic Banking Bulletin, State Bank of Pakistan which shows that by the end of December 2017, there are 5 full-fledged Islamic banks working in the country with a branch network of 1,275 branches. Similarly, 16 conventional banks are also offering Islamic banking services through their 1,178 branches which are offering only Islamic Banking services. Many banks have also established 128 sub-branches and 1,277 windows, offering Islamic banking services. Therefore, total Islamic banking branch network in Pakistan is 2,581. Financially, Islamic banking industry is growing rapidly by having total assets of Pak Rupees 2,272 Billion and total deposits of Pak Rupees 1,885 Billion. Within a short period of 15 years, Islamic banking industry has achieved a growth rate of 15 to 20 percent and captured 12.4% share in total assets and 14.5% share in total deposits of overall banking industry of the country (SBP). In the light of the facts, it can be concluded that at present, Islamic banking industry is achieving extraordinary and rapid growth and it has potential to grow further in Pakistan.

Pakistan is a Muslim country but its financial and banking system is working on conventional basis since its independence in 1947. Several attempts have been made in 1950s and 1980s to convert this system into Islamic, but failed due to several political and administrative reasons. Finally, Supreme ...