KARACHI: Conventional banks have significantly altered their lending pattern to the private sector, extending nearly five times more financing through their Islamic banking branches than a year earlier instead of through conventional lending.
Most conventional banks have found Islamic banking more profitable, as it allows them to offer lower returns to depositors than conventional banking. This preference for Islamic banking has been reshaping the dynamics of Pakistan’s banking sector. As a result, Islamic financing and assets have been growing at a much faster pace than those of conventional banking.
According to the latest data released by the State Bank of Pakistan (SBP), lending to the private sector by the Islamic banking branches of conventional banks surged to Rs795.5 billion during FY26 (from July 1, 2025 to June 26, 2026), compared to just Rs153bn in FY25.
The trend suggests that conventional banks have increasingly recognised Islamic banking as a more profitable business model. Banking experts say one of the reasons is that Islamic banks generally offer lower returns to depositors and investors than conventional banks.
Islamic branches of commercial banks extend Rs795.5bn in private sector financing
