Islamic Banking refers to a system of banking which follows principles of Islamic law (Shariah).Shariah prohibits people from paying or accepting interest fees for lending money and also investing in businesses which are considered contrary to its principles.
Idea of Islamic banking in Pakistan is also emerging. Pakistan is an Islamic state and most of the people in Pakistan follow teachings of fiqqa-e-hanfia, according to which interest is strictly prohibited.
Many commercial banks have taken steps to promote Islamic banking in Pakistan by opening additional branches focusing in Shariah based financing products and services.
Many completely new Islamic institutes are also emerging but still people doubt whether these are purely Islamic or not? The main reason of this is profit and loss sharing.
Banks share only profit with consumers but not loss while according to Shariah both the profit and loss must be shared. Moreover people don’t know where the banks are investing their money.
Future of Islamic banking in Pakistan is bright but only if banks take serious steps to build confidence in consumers. Banks can only build confidence by sharing loss with consumers and following other Islamic principles.