ISLAMIC BANKING OF PAKISTAN

ABSTRACT
Islamic finance was practiced mostly in the Muslim world throughout the middle-ages, fostering
trade and business activities with the development of credit. The basic principle of Islamic
banking is the prohibition of Riba or interest. This presentation will mainly focus on Islamic
banking deposits growth, major rules of Shariah regarding Islamic banking, interest free banking
products, and overall growth of different Islamic banks of Pakistan. Analysis of Central
Tendency measures on the data, and few comparisons of Islamic and Conventional Banks will
also be part of presentation.
Allah has forbidden taking interest and has guided everyone to do business, trade and profession
without indulging in this hazard. In this respect, based on our research, we will evaluate our
Islamic banking practices.

Keywords: Islamic banking, Islamic banking of Pakistan, Banking, Riba, Interest free,
Conventional banks, Service Quality, Customer Satisfaction, Islamic banking Products, Islamic
and Commercial Banks Comparison.

INTRODUCTION
Islamic Banking is consistent with the principles of Shariah law and its practical application
through the development of Islamic economics. Islamic banks affect monetary system by
adjusting the demand and supply forces for money. It is found that Islamic banking system is
superior to conventional banking system as it ensures more stable financial sector. There are two
banking systems that exist in Pakistan namely: Islamic Banking and Conventional Banking.
The Islamic bank and conventional bank is differentiated on the basis of objectives, Riba and risk
sharing practices. The word "Riba" means excess, increase or addition, an excess or
increase. Islamic banks generate income as profits i.e. variable while Conventional bank earns
from the interest that is fixed, risk is shared among lender, borrower and bank in Islamic bank
while Conventional bank transfers the whole risk to others. There will be positive relationships
between service quality and customer satisfaction regarding Islamic banks and Conventional
banks in Pakistan. In this research, we include Introduction of New Products and Services, Year
Wise Entry of Players, Province & City-Wise Breakup of Islamic Banking Branch Network,
Growth in the Branch Network of Islamic Banking Industry, Deposits and its structure, Cash
flow Statement, Total Assets, Financing, Investments, sources and Uses of funds, Income
statements, Product Offering of the Islamic Banking, This study is important due to an emerging
trend of Islamic banking practices in Pakistan in the existence of conventional banking system.
Data were collected from 5 banks customers by using stratified random sampling. MICROSOFT
EXCEL, MINITAB & SPSS 16.0 version is applied for data analysis. With the help of Central
tendency we analyze and find the results, which reflect that there is strong positive relationship.
This study has a number of implications for bankers, policy makers and academicians.

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