Islamic banking assets reach Rs14.47 trillion, sector share rises to 23%

Pakistan’s Islamic banking sector expanded during 2025, increasing its share in the country’s financial system with assets reaching nearly 23 percent of the overall banking industry and financing accounting for about 38 percent, according to the State Bank of Pakistan.

Data released in the central bank’s Islamic Banking Bulletin showed that Islamic Banking Institutions (IBIs) continued to grow during the year, strengthening their presence in the financial sector.

Islamic banking assets increased by Rs3.4 trillion during 2025 to reach Rs14.467 trillion by the end of December, compared with Rs11.070 trillion in December 2024.

From a market share perspective, Islamic banking assets represented 22.9 percent of the overall banking industry, while deposits accounted for 27.8 percent. The sector’s share in total financing rose to 38.1 percent, while its share in investments stood at 16.9 percent.

An analysis of the asset structure showed that net financing made up 39.1 percent of Islamic banking assets, while net investments accounted for 45.7 percent. The growth in assets was largely driven by a sharp increase in financing activity.

The financing portfolio expanded by about 40 percent year-on-year, rising to Rs5.654 trillion by December 2025 from Rs4.037 trillion a year earlier.

Net investments also recorded growth of 32.4 percent, increasing to Rs6.605 trillion by the end of the year. According to the SBP, the increase reflects growing demand for Shariah-compliant financing and investment products.

Total deposits of Islamic Banking Institutions also increased during the year, rising by Rs3.132 trillion to reach Rs11.037 trillion by December 2025.

Within the deposit structure, Islamic banks accounted for 56.7 percent of total deposits, while Islamic banking branches of conventional banks held a share of 43.3 percent.

Current and savings accounts remained the main sources of deposits. Current deposits stood at Rs4,577 billion, while savings deposits reached Rs4,008 billion. Savings deposits increased by Rs266 billion during the period, while current deposits rose by Rs387 billion.

Fixed deposits also grew, increasing by Rs186 billion during the year.

The expansion in investments was largely supported by allocations in government Ijarah Sukuk.

Islamic banking branches of conventional banks increased their net investments by Rs1 trillion to reach Rs2.686 trillion by December 2025. Full-fledged Islamic banks recorded an increase of Rs609 billion, bringing their net investments to Rs3.919 trillion.

In terms of market share, Islamic banks held 59.3 percent of total net investments, while Islamic banking branches accounted for 40.7 percent.

However, the sector’s profitability declined during the year, with profit before tax falling to Rs420 billion by December 2025 from Rs497 billion recorded a year earlier.