How challenges transform banking behavior of Islamic banks’ employees: A study in Pakistan

  • Syed Ahmad Ali Assistant Professor, Department of Management, School of Business Management, University of Management & Technology, Lahore, Pakistan
  • Muhammad Ahmed Senior Assistant Professor, Head of Department, Management Sciences, Bahria University (Lahore Campus)
Keywords: Islamic Banking, Contemporary Challenges, Pakistan, Riba, Customers


This study examines and helps to identify and recognize the challenges being faced by Islamic banks in Pakistan. In today’s global and borderless market, financial institutions are facing a severe competition for their survival. Currently, many objections are raised on Islamic banks as they have to face many challenges up front not only for competing all through but for their necessary survival too.

The current world economic system is heavily dependent on interest based transactions due to which concentration of wealth is in the hands of selected few. It leads to a society with a wide gap between rich and poor. In contrast Islam encourages circulation of wealth, promotes sale and trade and discourages Interest (Riba). The objections raised on Islamic banks may include weak measures of service quality, improper institutional framework, lack of shariah supervisory role, knowledge gap and lack of understanding of shariah knowledge among customers and potential customers. It may further include improper training of staff and lack of resources. Hence, there are several objections raised by their competitors that Islamic banks have to face and to encounter them.

To compete with this interest based system, Islam has the most modest, equitable and perfect solution (The Islamic Modes of Finance or Islamic Capitalism) having a long lasting impact if adopted not only by his followers but for non-believers too. The overall Islamic banking industry of Pakistan needs to meet all contemporary challenges in order to grow at more pace in comparison with conventional banks.

To carry out a detailed research, both quantitative and qualitative measures will be used. It will enable us to have data in descriptive as well as in interviews format so that people can express more of their views regarding Islamic banking. This research will be helpful not only for the management personnel of Islamic banking industry at a wider level but for industry itself. In short this study can lead to Islamization of banking industry or at least to move one step further for the betterment of Islamic banking in Pakistan.


Haron, Sudin, and Nursofiza Wan Azmi. Islamic Finance Banking System (McGraw-Hill Singapore-Professional, 2009)

El-Gamal, Mahmoud A. "Interest and the Paradox of Contemporary Islamic Law and Finance." Fordham Int'l LJ 27 (2003): 108.

Surah Al 'Imran: 130

Akhtar, Muhammad Farhan, Khizer Ali, and Shama Sadaqat. "Factors Influencing the Profitability of Islamic Banks of Pakistan." International Research Journal of Finance and Economics 66, no. 66 (2011): 1-8.

Khan, Mubbsher Munawar, and Mariam Fasih. "Impact of Service Quality on Customer Satisfaction and Customer Loyalty: Evidence from Banking Sector." Pakistan Journal of Commerce and Social Sciences (PJCSS) 8, no. 2 (2014): 331-54.

Ahmed, Umer. "Challenges Facing Islamic Banking." (2010).

SBP, State Bank of Pakistan. Strategic Plan Islamic Banking Industry of Pakistan 2014 – 2018. 2014.

Akram, Muhammad, Mamoona Rafique, and Hassan Mobeen Alam. "Prospects of Islamic Banking: Reflections from Pakistan." Australian Journal of Business and Management Research 1, no. 2 (2011): 125.

Zaidi, S.H. Review: The Historic Verdict on Riba2003)

Imran, Muhammad, Shahzad Abdul Samad, and Rass Masood. "Awareness Level of Islamic Banking in Pakistan's Two Largest Cities." Journal of Managerial Sciences 5, no. 1 (2011).

SBP, State Bank of Pakistan. Quarterly Performance Review of the Banking System, Banking Surveillance Department 2010.

Havrylchyk, Olena. "Efficiency of the Polish Banking Industry: Foreign Versus Domestic Banks." Journal of Banking & Finance 30, no. 7 (2006): 1975-96.

Abedniya, Abed, and Majid Nokhbeh Zaeim. "Measuring the Perceive Service Quality in the Islamic Banking System in Malaysia." International Journal of Business and Social Science 2, no. 13 (2011).

Khan, Feisal. "How ‘Islamic’is Islamic Banking?", Journal of Economic Behavior & Organization 76, no. 3 (2010): 805-20.

Sheikh, SA. "Critical Analysis of Current Islamic Banking System." on line] Available at: www. accountancy. com. pk [Accessed 17th May 2011] (2007).

Ali, SM. Issues and Challenges for Developing an Islamic Inter-Bank Benchmark in Pakistan. 9th International Conference on Islamic Economics and Finance, 2013.

SBP, State Bank Of Pakistan. Quarterly Performance Review of the Banking System, Banking Surveillance Department Retrieved From: Http://Www.Sbp.Org.Pk/Publications/Q_Reviews/Q_Review_Sep_08.Pdf 2008.

SBP, State Bank of Pakistan. Annual Report. 2010.

Ullah, Shakir, and Dima Jamali. "Institutional Investors and Corporate Social Responsibility: The Role of Islamic Financial Institutions." International review of business research papers 6, no. 1 (2010): 619-30.

Haron, Abdullah, and John Lee Hin Hock. "Inherent Risk: Credit and Market Risks." Islamic finance: The regulatory challenge 2 (2007).

Iqbal, Munawar, Auṣāf Aḥmad, and Tariqullah Khan. Challenges Facing Islamic Banking (Islamic Research and Training Institute Jeddah, 1998)

Bader, Mohammed Khaled I, Shamsher Mohamad, Mohamed Ariff, and Taufiq Hassan Shah. "Cost, Revenue, and Profit Efficiency of Islamic Versus Conventional Banks: International Evidence Using Data Envelopment Analysis." Islamic Economic Studies 15, no. 2 (2008).

Ahmad, Ashfaq, and Muhammad Iqbal Saif. "Islamic Banking Experience of Pakistan: Comparison between Islamic and Conventional Banks." International Journal of Business and management 5, no. 2 (2010): 137.