Key Takeaways
- Islamic banking institutions increased their share of total banking assets and deposits.
- Islamic banking grew by 13 percent, outpacing the broader banking sector's 9.1 percent growth.
- The sector's share of total banking assets reached 23.7 percent by June 2026.
Islamic banking institutions in Pakistan have seen a significant increase in their market share, according to the State Bank of Pakistan’s (SBP) Mid-Year Performance Review of the Banking Sector for H1 2026.
During the first half of 2026, Islamic banking institutions grew by 13 percent, compared to 11.5 percent growth in the same period last year.
The share of Islamic banking institutions in the banking sector’s total assets increased to 23.7 percent by the end of June 2026, up from 22.9 percent in December 2025.
Their share of total deposits also rose to 29.2 percent from 27.8 percent during the same period, indicating a steady increase in their presence in Pakistan’s financial system.
The expansion was driven by the performance of full-fledged Islamic banks, as well as growing interest among conventional banks in opening dedicated Islamic windows and branches to attract customers seeking Shariah-compliant banking services.
The broader banking sector also recorded growth during the period, with total banking sector deposits increasing by 9.3 percent to Rs. 43,332 billion, while the sector’s overall balance sheet expanded by 9.1 percent to Rs. 68,997 billion.
The continued rise in Islamic banking’s share of assets and deposits suggests growing competition between Islamic and conventional banking institutions, with more banks seeking to serve customers interested in interest-free and Shariah-compliant financial products.
This trend highlights the increasing demand for Islamic banking services in Pakistan, driven by both institutional and customer interest in Shariah-compliant financial products.
