Islamic Finance and Economic

Growth

Presented by:
Hussain Ali
Irshan khan
M.Basharat
 Introduction of Islamic Finance
• Islamic banking in Pakistan has raised up in
last ten to eleven years.

• Islamic banks offer many products which are

different from conventional banking.

• Islamic finance is ultimately found on the

principle of partnership and corporation, which
calls for a system of equity participation and risk-
sharing.
Overview of Islamic Banking- Progress
and Market share
• Total assets of Islamic banking industry grew by Rs. 148 billion
during the quarter April to June, 2018 and were recorded at
Rs. 2,482 billion by end June, 2018.

• Similarly, deposits of Islamic banking industry also witnessed

growth of Rs. 117 billion during the period under review and
reached to Rs. 2,033 billion by end June, 2018.

• Market share of Islamic banking assets and deposits in the

overall banking industry was recorded at 12.9 percent and
14.8 percent, respectively by end June, 2018.
• On profitability side, Islamic banking industry recorded
profit before tax of Rs. 15 billion by end June, 2018 compared
to Rs. 12 billion in the same quarter last year.

• Currently, islamic banking was holding more than 8% share of

the total banking industry in the country
 Branch network of Islamic banking
industry
• The network of Islamic banking industry
consisted of 21 Islamic banking institutions; 5
full-fledged Islamic banks and 16 conventional
banks having standalone Islamic banking
branches.

• Branch network of Islamic banking industry

was recorded at 2,685 (spread across 111
districts)
• The number of Islamic banking windows operated by
conventional banks having standalone Islamic banking
branches stood at 1,284.
ROLE OF STATE BANK IN THE DEVELOPMENT OF
ISLAMIC BANKING
• the State bank of Pakistan has established a
separate a department forIslamic banks
named Islamic Banking Department.
• the very important is transparency of Shariah
compliance with respect to the international
practices of state bank of Pakistan.
• To convert the interest based financial system
into interest free financial system
• State Bank of Pakistan to make change in the
discount rate in money market by introducing the
system of profit and loss sharing .

• After adopting the profit and loss sharing system,

every commercial bank on 1st July 1985 became
interest free.

• the Islamic Banking Department shaped with the

objective to develop and promote the Shariah
compliant banking as a compatible banking
system in the region
The main principles of islamic
finance
 1: Gambling:-
• In Islam, the acquisition of wealth through evil
means or participation in gambling is
prohibited. It will protect the Muslims from
the conventional insurance products because
that is a type of gambling. On the other hand,
Islamic banking works in Takaful that involves
mutual responsibility and shared risks.
 Gharar:
• According to the Islamic finance principles,
Muslims are not allowed to participate in the
ambiguous and uncertain transactions.
According to Islamic rules, both parties should
have a proper control over the business. As
well as the complete information should be
shared with both parties so that the profit and
loss will be equally shared.
 Profit and Loss Sharing:
• It is one of the best principles of Islamic
finance where the partners will share their
profit and loss according to the part they
played in the business. There will be no
guarantee on the rate of the returns that the
Muslims will play the part of a partner and not
a creditor.
 Shared Risk
• In the economic transactions, the risk sharing
is promoted by the Islamic banking. When two
or more parties will share the risk following
the principles of Islamic banking the burden of
the risk will be divided and reduced in the
parties. So it will improve the economic
activity of the state.
 Recomendations
• Increase islamic market competiteveness.
 conclusions
• So we can say that the principles of Islamic finance
guide us to invest in an industry that will help us to
achieve the financial and social objectives that have
been determined by Islam. The Islamic finance
principles have been designed to make an economy
successful. So it is a way of saving our money from
being invested in a wrong path. Principles of Islamic
finance are discussed in more details during certified
Islamic finance expert (CIFE) and diploma in Islamic
banking programs, where you study Islamic banking
courses. These programs are offered by institute of
Islamic banking and finance at AIMS.