KARACHI: Pakistan’s Islamic banking sector continued its robust growth during the last year 2025, further strengthening its position in the country’s financial system with 23 percent share in assets and 38 percent share in financing.
According to Islamic Banking Bulletin of the State Bank of Pakistan (SBP), the Islamic banking sector in Pakistan sustained its strong expansion trajectory during last calendar, further consolidating its role in the financial system.
From a market share perspective, Islamic banking assets represented 22.9 percent of the overall banking industry, while deposits accounted for a larger portion at 27.8 percent. The sector’s share in total financing reached 38.1 percent, with investments contributing 16.9 percent of the industry’s aggregate, underscoring its growing presence.
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The total assets of Islamic Banking Institutions (IBIs) expanded by Rs3.4 trillion during 2025, rising to Rs14.467 trillion by the end of the year from Rs11.070 trillion in December 2024.
A detailed analysis of the asset composition shows that net financing accounted for 39.1 percent of total Islamic banking assets, while net investments contributed 45.7 percent. The growth in overall assets was largely driven by a substantial increase in financing during the year.
The financing portfolio recorded a significant year-on-year increase of around 40 percent, rising to Rs5.654 trillion by December 2025 from Rs4.037 trillion in December 2024.Meanwhile, net investments also registered strong growth, increasing by 32.4 percent to reach Rs6.605 trillion by the end of the last calendar year. “These developments point to rising demand for Shariah-compliant financing and investment channels, thereby enhancing the sector’s financial depth”, the SBP said.
Taken together, these indicators highlight not only the industry’s sustained progress but also its deeper integration into Pakistan’s financial architecture. The consistent improvement in key metrics and the expanding branch network demonstrate both the sector’s resilience and the increasing consumer preference for Islamic banking, SBP added.
Total deposits of IBIs sustained their growth momentum during 2025, rising by Rs3.132 trillion to reach Rs 11.037 trillion. This growth further strengthened IBI’s position in the overall banking industry, with their market share climbing to 27.8 percent. By the end of December 2025, IBs accounted for 56.7 percent of total IBIs deposits, while IBBs held a growing 43.3 percent share.
Deposit composition reveals that current and saving deposits remained the key drivers of growth, standing at PKR 4,577 billion and PKR 4,008 billion, respectively. Saving deposits registered a notable rise of PKR 266 billion (7.1 percent), while current deposits advanced by PKR 387 billion (9.2 percent). In addition, fixed deposits also recorded an increase during the quarter, expanding by PKR 186 billion (20.4 percent).
Increase in investment was largely supported by allocations in various Ijarah Sukuks (GIS) of Government of Pakistan.
The SBP noted that Islamic Banking Branches (IBBs) of conventional banks boosted their net investments by Rs one trillion, bringing the total to Rs 2.686 trillion in December 2025. In contrast, full-fledged Islamic Banks (IBs) recorded an increase of Rs 609 billion to stand at Rs 3.919 trillion. From a market share standpoint, IBs maintained leadership with 59.3 percent of overall net investments, while IBBs accounted for 40.7 percent.
The profitability of IBIs decreased, with profit before tax increasing to Rs 420 billion by the end of December 2025 from Rs 497 billion in December 2024.
Copyright Business Recorder, 2026
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