Growth and Challenges of Islamic Banking in Pakistan: A Comparative Analysis with Conventional Banking

Abstract

Islamic banking is considered to be one of the booming branches of the Pakistani financial system owing to the growing demand of the people towards Shariah compliant financial services, government backing as well as the rapid institutionalization. In this paper, the research will focus on the growth trend of the Islamic banking in Pakistan and compare its performance, customer image, the regulatory environment, and the operational issue with that of conventional banking. Through qualitative review of secondary data, the paper brings out the fact that Islamic banks have registered high asset growth, market share, and financial inclusion than was the case in earlier decades. Nevertheless, the problem of a limited product diversification, lack of Shariah-qualified professionals, increased operational expenses, and misconceptions among the people still limit the full potential of this. The comparison analysis shows that Islamic banking may prove to be more resilient and attractive, but conventional banks are more dominant because of better infrastructure and broader coverage. The paper ends with a conclusion and recommendations on how the regulatory support can be empowered, human capital boosted and consumer awareness can be enhanced to ensure sustainable growth of Islamic banking in Pakistan.