A POTENTIAL OF ISLAMIC FINANCE IN THE GROWTH OF PAKISTAN ECONOMY

Abstract

After the global financial crises of 2008 countries like USA, and UK was deficiently ruined. Bankers and financial institutions adopted a system that was free from interest (Riba) and uncertainties (Garar) and followed the principles of Shariah. According to Shariah fixed or floating payment of interest or fees known as Riba or usury is strictly prohibited in Islam. As per the ayah of QURAN one should not take interest, those who strictly follows the Shariah principles will be successful here and thereafter. On 10th of March 2003 Islamic financial services board had started their operations which promotes Islamic financial services by issuing prudential standards and guiding principles for banking, insurances, and capital sectors. As far as it has been verified that Islamic financing has an alternative to the conventional financial system. It’s an important component of the global financial architecture. In 2010 it had been identified that Islamic financial industry will be successful if it follows the Islamic principles sternly. Malaysia was the one who strictly followed Islamic financial system and they are still successful in their pursuit. Successful products of Islamic financial industry are Sukuk Islamic Bonds and Takaful & Fund Management. At the end of 2010 Sukuk market was estimated to be worth $143 billion and at the end of 2012 Islamic financial assets reached at $1.6 trillion. Today Islamic finance has a next step of development if it’s strictly followed by their regulators or Islamic financial institutions. Several research papers have confirmed that Islamic financing is different from conventional banking or not. There are too many researches followed by different financial centers or institutions like Islamic financial services board, world summit conference, and Kaula lumpur conference. This thesis report consists of five chapters. The problem statement is Islamic finance has a positive impact on the banking sector of Pakistan? What is the history of Islamic financing? Chapter 1 gives us an introduction about all the assets of Islamic financing. It also verifies the present status of Islamic financing. Chapter 2 tells us about the research design and methods and methods used for research. Chapter 3 has foreign and local reviews relating to the topic. It also covers a case study of the four banks that have been undergone Islamic financing recently. Chapter 4 contains the analysis of the questionnaire and finally chapter five gives us the summary of the findings, conclusion and recommendations.