Islamic Banking Big Winner in First Half of 2026

Islamic banking institutions experienced a 13 percent increase in their share of total banking assets and deposits during the first half of 2026, according to the State Bank of Pakistan's Mid-Year Performance Review of the Banking Sector. This marked a significant 1.5 percentage point rise compared to the same period in 2025. By the end of June 2026, Islamic banking institutions accounted for 23.7 percent of the banking sector's total assets, up from 22.9 percent in December 2025.

Their share of total deposits surged to 29.2 percent from 27.8 percent during the same timeframe. The growth in Islamic banking demonstrates its expansion and increasing dominance in Pakistan's financial landscape. This development was propelled by the performance of standalone Islamic banks and an increasing interest among conventional banks to establish specialized Islamic windows and branches to cater to customers seeking Shariah-compliant financial services.

The broader banking sector also witnessed growth, with total deposits increasing by 9.3 percent to Rs. 43,332 billion and the sector's overall balance sheet expanding by 9.1 percent to Rs. 68,997 billion. The escalating share of Islamic banking in assets and deposits signals growing competition between Islamic and conventional banking institutions, as more banks strive to serve customers interested in interest-free and Shariah-compliant financial products.