Pakistan’s progress on digital banking has been woefully slow; it is even more distressing in the Islamic fintech space despite the growing demand for Shariah-compliant digital banking solutions.

While several other Muslim and non-Muslim countries are making strides in the fast-emerging Islamic fintech market, Pakistan is falling behind this global trend, a strong appetite for Shariah-compliant digital finance notwithstanding.

The policymakers’ failure to get even a single fully operational digital bank aligned with Islamic financial principles off the ground is even more surprising given the fact that the entire banking industry is to completely convert itself into being Shariah-compliant by the end of 2027.

Over the last few years, Islamic banking, largely driven by individual consumers seeking Shariah-compliant financial solutions, has grown rapidly. Currently, it constitutes nearly a fifth of the country’s entire banking industry, with assets surging to Rs9.9 trillion and deposits increasing to Rs7.6tr. The net financing by six Islamic banks and 16 conventional banks that have standalone Islamic banking branches has reached Rs3.25tr and their net investments rose by 22.3 per cent to Rs4.8tr.

Growth momentum in the Islamic banking industry has not convinced policymakers to create an ecosystem for digital Islamic banking

However, this growth momentum in the Islamic banking industry has not convinced policymakers to create an ecosystem for digital Islamic banking, as is the case in countries like Malaysia, Indonesia, and the United Arab Emirates, despite the interest of many investors amid a notable demand growth.

Though Islamic banks operating in the Pakistan market have mobile apps, there is a fundamental difference between an Islamic bank’s mobile app and a fully digital Islamic bank.........

© Dawn Business