Assessing Commitment of Pakistani Islamic Banks to Financial Inclusion

Abstract

This qualitative research delves into the motivations and strategies behind the financial inclusion initiatives undertaken by the Islamic Banking Industry in Pakistan. Through semi-structured interviews with ten experts encompassing both Islamic and conventional banking perspectives, this study explores the distinctive market positioning of Islamic banks, their competitive pricing models, and their risk aversion, which aligns with conventional counterparts. Key findings reveal that Islamic banks have successfully carved out their market share and exhibit risk-averse behaviour akin to conventional banks. As low-risk investment opportunities diminish, Islamic banks are anticipated to shift towards participatory modes of finance. However, the study cautions against expecting the full realization of Islamic economic principles through Islamic banking practices. Moreover, experts express reservations regarding the political will of authorities to drive the comprehensive transformation of the financial system into an Islamic framework. The study, conducted in the twin cities of Rawalpindi and Islamabad, emphasizes the need for Islamic banks to establish a distinct identity, providing guidelines to evolve into entities focused on serving the underprivileged. In conclusion, this research recommends further exploration and offers guidelines for Islamic banks to position themselves uniquely, fostering a trajectory towards inclusive banking for the economically disadvantaged.