The rise of Islamic fintechs

Over the past two decades, Pakistani banking has undergone drastic shifts. There were the good days when foreign banks could be spotted every few kilometres in the major cities, and consumer financing was all the craze. Then came the bad days and, with them, the defaults. Global players pulled out, and everyone flocked to lending to the sovereign. Amid these cycles, however, one trend had continued unabated: the rise of Islamic banking. Its deposit base increased from Rs83.7 billion in December 2006 to Rs4.9 trillion as of June 2022. That’s a compound annual growth rate of 30 per cent — twice the industry-wide rate. As a result, the share of Islamic in overall banking deposits has jumped from 2.8pc to 20.5pc during this period. Of course, part of the growth is due to a low-base effect, but this is nonetheless phenomenal progress. In a deeply religious society with an aversion to riba, many firmly believe Islamic is the way forward to increase the number of banked people.