THIS is with reference to the thought-provoking article ‘Is Islamic banking Islamic?’ (June 6), which discussed the growth of Islamic banking and its pro-motion in Pakistan under the banner of the religion. The current Islamic banking framework represents an initial step towards potential Islamisation of the financial sector, and it remains, even after more than two decades, far removed from the true spirit and principles of Islamic finance.
Unfortunately, the key stakeholders appear to have little interest in introducing meaningful reforms that would actually align banking practices with the genuine religious concepts of trade, risk-sharing and partnership.
The architects of the existing system in Pakistan have developed a structure in which Shariah Boards are headed by scholars trained in seminaries. While their religious expertise is important, the focus appears to be on validating the existing banking products rather than funda-mentally transforming them in accordance with Islamic principles.
As someone working in the corporate sector and regularly dealing with Islamic banks, I have observed that customers often bear additional costs in the name of Shariah compliance. These include extra documentation, higher stamp duties on multiple agreements designed to structure transactions, and, in many cases, higher financing costs compared to conventional banking tools.
Furthermore, settlement and repayment processes in Islamic banking can take several days to complete. During this period, the profit calculation continues despite the customer’s intention to settle the obligation. In contrast, under con-ventional banking arrangements, interest typically ceases once the repayment amount is credited to the lender’s account. Such operational inefficiencies increase the financial burden on customers and raise questions about fairness and transparency.
Like many institutions in Pakistan, Islamic banking is more of a commercial branding exercise than a genuine effort to establish a financial system based on Islamic economic principles.
Unless substantial reforms are under-taken, the industry may continue to offer the appearance of Shariah compliance without delivering its intended substance.
Faisal Habib
Karachi
Published in Dawn, June 21st, 2026