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Economic Analysis of Islamic Banking in Pakistan

Author

Listed:
  • Shaikh, Salman

Abstract

Islamic banking has achieved substantial growth in Pakistan and all over the world in the last two decades or so. Despite the financial and economic crisis of 2007 and afterwards, the Islamic banking industry has witnessed exemplary and uninterrupted growth. In Pakistan, it has achieved market share of almost 9% in the banking industry. There is vast literature available on explaining the features and mechanics of Islamic banking; however, limited attention has been paid on the thorough analysis of Islamic banking architecture from finance, economics, and development and distribution point of view. Though, there exists substantial body of literature explaining the negative effects of interest based institutions in Capitalism. But, little has been written on conducting a meaningful and objective economic analysis of Islamic banking practices. In this paper, we attempt to touch upon an overlooked area which is a thorough and objective analysis of Islamic banking with its economic merits and shortcomings. The paper is structured as follows. Section 2 explains the problem with interest based financial intermediation. Section 3 describes the essential features of commonly used Islamic contracts and modes of financing. Section 4 presents the economic analysis of Islamic banking and modes of financing by explaining the merits. Section 5 presents the economic analysis of Islamic banking and modes of financing by outlining the shortcomings.

Suggested Citation

  • Shaikh, Salman, 2013. "Economic Analysis of Islamic Banking in Pakistan," MPRA Paper 53797, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53797
    as

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    References listed on IDEAS

    as
    1. Mr. Abbas Mirakhor & Mr. Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 1991/088, International Monetary Fund.
    2. Imran Tahir & Mark Brimble, 2011. "Islamic investment behaviour," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 4(2), pages 116-130, June.
    3. Imran Tahir & Mark Brimble, 2011. "Islamic investment behaviour," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 4(2), pages 116-130, June.
    4. Imran Tahir & Mark Brimble, 2011. "Islamic investment behaviour," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 4(2), pages 116-130, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Islamic Banking; Islamic Finance; Financial System; Financial Markets; Financial Institutions; Consumer Financing; Corporate Finance;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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