How Islamic is Islamic banking in Pakistan?

Purpose - Increasing popularity of Islamic banks in the wake of recent global financial crisis of 2008 has generated debate among researcher about practicality of Islamic banks. Critics argue that Islamic banks are not working according true spirits ofSharia’h. This paper aims to empirically address the question that how Islamic is Islamic banking in the case of Pakistan. Design/methodology/approach - The target population in this paper is staff at the Islamic banks who are employees and managers. Data are also collected from customers to analyze their views. Sample comprises 63 branches of five full-fledge Islamic banks and five Islamic branches of conventional banks in Islamabad. For analysis purpose, the study uses exploratory factor analysis. Findings - Findings indicate that Islamic banks are followingSharia’hexcluding the provision of profit loss sharing contracts and provision ofqard-ul-hassan. Moreover, it is found that customers are less agreed and more neutral aboutSharia’h-based operations at Islamic banks. Originality/value - Findings will help regulators to introduce wide range of Islamic financial contracts that involve profit loss sharing and consider the expansion of emerging industry. Moreover, findings suggest to consider promotional techniques to create awareness of Islamic banking among the customers.