By Shahzad Khokhar, Head of Islamic Banking, Mashreq Pakistan
Islamic banking, with its principles of risk-sharing and ethical finance, holds immense potential to transform the financial landscape in Pakistan. However, access to financial services remains a challenge for many. Digitization offers a powerful tool to overcome these obstacles and unlock the full potential of Islamic banking, bringing inclusive and innovative financial solutions to millions of Pakistanis without any geographical limitation or proximity to the traditional brick and mortar branch. Infact the true potential and growth of Islamic Banking in a fair and transparent manner can only be achieved through digitization; when you give the power to the people to select the solution they want. The fundamental essence of both Islamic Banking and Digital Banking are rooted in transparency.
One of the most significant demographic trends shaping Pakistan is its population tilt towards the youth 64% of Pakistanis are under the age of 30, and their expectations from financial services are vastly different from those of previous generations. This digital-native generation demands convenience, transparency, and customization—qualities that digitization can seamlessly integrate into Islamic banking. For example, mobile banking transactions in Pakistan have seen explosive growth, with a 62% increase in transaction volume and a 74% rise in transaction value during FY24, according to the State Bank of Pakistan’s Annual Payment Systems Review. Digital onboarding for accounts and financing products will become standard offering. The introduction of mobile-first, Sharia-compliant financial serviceswill effectively bridge the gap between ethical finance and modern consumer expectations.
Collaboration between Islamic banking and fintech companies is another cornerstone of this transformation. Fintechs bring agility, innovation, and a deep understanding of user-centric design, while Islamic banks provide the trust and compliance framework necessary for success in a Sharia-compliant market. Globally, together these entities are creating solutions that were previously unimaginable—from blockchain-based Sukuk issuance to AI-driven Zakat management platforms. Such innovations not only improve customer experience but also significantly enhance operational efficiency and governance, laying the groundwork for scalable growth.
Perhaps the most profound impact of digitization lies in its capacity to extend financial inclusion to traditionally excluded populations. Islamic banking is uniquely positioned to address the financial needs of underserved communities, including small business owners, agricultural workers, and women entrepreneurs.
Of course, the journey is not without its challenges. Infrastructure gaps, particularly in rural areas, remain a hurdle. Cybersecurity threats are a growing concern as digital adoption accelerates. And perhaps most critically, there is a pressing need for robust digital literacy programs to ensure that customers understand and trust these new solutions. There is also an opportunity to build awareness on Islamic Banking, and how it can offer a better value proposition on the foundations of Shariah principles. The State Bank of Pakistan, through its National Financial Literacy Programme (NFLP), has made commendable efforts to increase financial literacy among the citizens of Pakistan and has undertaken initiatives to promote Islamic Banking awareness.
Mashreq is bringing a truly end-to-end Islamic digital banking solution to Pakistan that is easy, transparent and accessible for all. For the first time, customers can open an Islamic banking account from anywhere in the country, within minutes and manage their finances entirely online, without needing to visit a branch. Unlike conventional models where some products are put before consumers without necessarily equipping them with the details of the full range, Mashreq’s digital Islamic banking platform empowers customers to explore and choose solutions that genuinely align with their needs and values. This shift in how ‘consumer choice’ is prioritized and made simple and transparent, aligns perfectly with Islamic banking principles of being accessible, transparent, ethical and Shariah-compliant – marking a new era of Islamic banking in Pakistan built for ‘trust’. We believe this approach will not only transforming the way people experience banking, it will also support in the meaningful growth of Islamic finance across the country.
Digitization is not just a trend but rather the foundation of the future of Islamic banking in Pakistan. The success of digital Islamic banking hinges on collaboration. Islamic banks, fintechs, regulators, and the wider community must work together to build a robust and inclusive digital ecosystem. By embracing technology, Islamic banks can not only expand their market share but also fulfill their ethical mandate to promote financial inclusion and socioeconomic development. As we move forward, the focus must remain on leveraging digital innovation to create value for customers, communities, and the country at large.
