Abstract:
This research investigates the performance of Islamic banking in Pakistan, focusing on its
contribution to economic growth and stability. Utilizing a comprehensive dataset spanning
from 2005 to 2020, the study employs Ordinary Least Square (OLS) model to analyze the
relationships between deposits, investment, financing, and economic growth. The findings
reveal significant positive impacts of deposits on the economy. Moreover, the study
underscores the positive role of Islamic banking in fostering financial inclusion and its
resilience during economic downturns, as evidenced by its performance during the global
financial crises.
The research contributes valuable insights for policymakers, financial experts, and
regulators in evaluating the economic dynamics of the nation. As Islamic banking
continues to grow in popularity, understanding its performance becomes crucial.
Recommendations include refining performance measurement tools, fostering innovation
in financial products, and addressing regulatory gaps to sustain the sector's growth.
Policymakers are urged to incentivize financial inclusion, support Islamic microfinance
organizations, and maintain a supportive regulatory environment. With ongoing efforts
and collaboration, the study envisions a robust and sustainable Islamic banking sector that
significantly contributes to Pakistan's economic prosperity.
