Financial sector is considered the backbone of any country heading towards progress. Pakistan’s financial sector had passed through significant changes during the last couple of decades. The growing banking industry, increased government regulations and an autonomous State Bank are one of those major changes but the question is how much these changes have contributed to the well being of underprivileged sections in Pakistan? Is the current financial system guaranteeing the mobilization of wealth among poor or does it assure justice and overall economic growth in Pakistan? Now we are moving towards the adoption of Islamic Financial Concepts, while finding answers to these questions. Organizations and consumers, in the financial sector have started to realize that the Islamic financial system is the best solution for all their economic and financial needs.

For this reason, Islamic Banking has achieved tremendous growth and as of today there are more than thousand branches of Islamic banks across the country. The major factors that has driven the growth of Islamic banking comprise of people’s inclination toward Shariah Compliance and interest free financial transactions. According to reliable sources, Islamic banking is going to experience a dramatic rise in growth. In line with the prevalent scenario, traditional banking may be wiped out during the next decade and thousands of job opportunities will open in Islamic banking. Despite these developments, Pakistan would still not be able to make a solid foundation of an Islamic banking system. There are still shortcomings in the present concept. First, the interest factor does exist and secondly awareness level is quite low about Islamic Banking due to complex terms used in the system and it becomes hard for consumers to understand the mechanism.

In order to accelerate the growth of Islamic Banking in Pakistan, there is a need to make the Islamic financial transactions easier for consumers to understand. The more simplified the Islamic finance will be, the more likely consumers would trust it. Secondly, it is required to form a pure Islamic Banking System, which could result in better functioning of the financial system, increased investment opportunities, coverage of informal financing activities, better resource allocation and good Governance. Apart from that, government of Pakistan needs to show commitment, while performing a leading role in establishing a pure Islamic banking arrangements with the help of effective policies and active supervision.

AHSAN RAZA,

Lahore, January 12.