Islamic Finance initiated to cater to the needs of faith-based Muslims four decades ago. Once looked at, as a patchwork of niches in the Arabian Gulf region and Malaysia, the market is evolving into a global one now. In the last thirty years, Islamic finance industry has made considerable progress at the global front. Especially, during the last decade the Islamic Financial Sector (IFS) has registered a robust growth (between 15 to 20 per cent per annum); making it one of the fastest growing segments of the overall financial system. Now, by the grace of Almighty Allah, Islamic finance has its roots expanded to Muslim as well as non-Muslim economies. Presently more than 1,100 institutions offering Islamic Financial Services (IFS) operate across the globe, which, coupled with a number of dedicated academic, legal, regulatory and supervisory institutions', provides a solid platform for future growth and development of the Islamic finance industry. With the passage of time the international Islamic financial market is becoming increasingly dynamic and diversified. Assets of the top 500 Islamic banks expanded 28.6pc to $822 billion at year-end 2009. Standard and Poor's estimates that Shariah-compliant assets are currently total about $1 trillion worldwide, after brisk growth during the past decade. The Islamic fund industry has also played its role in exponential growth, whereby the number of Islamic funds, has also played its role in exponential growth, whereby the number of Islamic funds, has reached a total of 517, more than doubled compared to the 207 funds available in January 2005. Due to prevailing economic crisis, safety remains an important priority for the investors and Islamic funds. Of the 517 Islamic funds across the world including Saudi Arabia, Malaysia, US, Kuwait, South Africa, Indonesia, Pakistan, Luxembourg, Bahrain, Japan, 274 are equity funds, 84 are mixed assets, 75 are money market or commodity murabaha funds, 67 are Sukuk Funds and 17 are capital funds. Major global banks and law firms have participated in the structuring and offering of a large number of Sukuk issued so far. Access to Western economies means that Islamic financial institutions gain entry into large and diversified economies with a wide array of asset classes for investment, and in the case of most developed countries, strong legal frameworks. In Pakistan the birth of Islamic Finance can be traced way bank in 1948 when founder of the nation, Mr Muhammad Ali Jinnah at the inauguration of State Bank of Pakistan said that: "I shall watch with keenness the work of your Research Organisation in evolving banking practices compatible with Islamic ideas of social and economic life. The economic system of the West has created almost insoluble problems for humanity and to many of us it appears that only a miracle can save it from disaster that is not facing the world. It has failed to do justice between man and man and to eradicate friction from the international field. On the contrary, it was largely responsible for the two world wars in the last half century. The Western world, in spite of its advantages, of mechanisation and industrial efficiency is today in a worse mess than ever before in history. The adoption of Western economic theory and practice will not help us in achieving our goal of creating a happy and contended people. We must work our destiny in our own way and present to the world an economic system based on true Islamic concept of equality of manhood and social justice. We will thereby be fulfilling our mission as Muslims and giving to humanity the message of peace which alone can save it and secure the welfare, happiness and prosperity of mankind." Efforts for economy wide elimination of Riba started during 1970s and most of the significant and practical steps were taken in 1980s. The initiative to re-introduce Islamic Banking in Pakistan was launched in 2001 when the government decided to promote Islamic banking in a gradual manner and as a parallel and compatible system that is in line with best international practices. Following the decision of the government to shift to interest free economy in a phased manner without causing any disruptions, the effort was envisaged to be based on a market driven and flexible approach. Furthermore it aims at building a broad based financial system all the country to enable all segments of the population to access financial services. Growth of Islamic Banking industry in Pakistan is tremendous. Currently Islamic Banks industry of Pakistan is operating with: * Five full Fledge Banks having 416 branches. * 13 Conventional Banks operating with 183 SAIBB and 68 Sub-branches. Despite above all success story, there are several factors that are likely to constrain the development of Islamic finance. * The current Islamic banking is based on replication of conventional banking products. While the replication is easy to understand by the customer and to offer by the Islamic banks, it is insufficient to achieve the overall objectives of Islamic financial system which is based on equitable distribution of economic gains on one hand and on the other hand make Islamic financial less efficient than their conventional counterparts. * Not all conventional products have an Islamic equivalent like treasury and liquidity management tools. * Necessary changes in legal, regulatory and tax environment to accommodate Islamic finance without incurring additional costs to the customers. * The different interpretations of Shariah ruling have resulted in lack of standardisation. Therefore common understanding is needed to integrated local market with global market. * Lack of necessary instruments for liquidity management. * Limited availability for access to Lender of Last Resort facility by the central bank due to lack of Shariah compliant compatible mode. * While the Islamic markets have remained resilient to the financial crisis, Islamic secondary market has remained inconsistent due to its infancy. Reasons are dearth of regular issuances of Sukuk. * HR and expertise in Islamic finance are scarce. The above considerations for developing of Islamic financial sector in future may be helpful for establishing sound footing of the industry and result in an Islamic financial regime which could compete with the international financial organisations. The writer is an Advisor to Habib Bank Ltd.