The Commission for Transformation of Financial System (CTFS) was established in January 2000 in the State Bank of Pakistan. It presented Shariah acquiescent methods of financing which encompassed producing lawful structures conductive for functioning of Islamic financial method, initiating a colossal education and teaching package for financiers and their patrons and a real channel through broadcasting for the overall public to generate consciousness about the Islamic financial system. It also dispensed with chief goods of banks and fiscal institutions, both for assets and liabilities both.

In September 2001 it was confirmed by the Régime that the move to interest free economy would be instituted in a steady and measured method and devoid of instigating any commotions and was also decided that state bank Pakistan would contemplate for; setting up divisions by the commercial banks for the resolve of leading Shariah compliant dealings. By identifying branches by the commercial banks solely dealing in Islamic products, and formulating a new full-grown policy for commercial banks to carry out exclusively banking trade based on suggested Islamic products. In January, 2002 State Bank of Pakistan gave first Islamic Banking License to Meezan Bank Ltd.

The development of Islamic Banking in Pakistan has been praiseworthy during the last two years .There is enormous craving for Islamic financial amenities. The development, is however, inhibited by the absence of setup support & shortage of specialized Islamic Bankers.

Currently, there are:

− 6 licensed fully working Islamic Banks with 40 branches
− 10 orthodox banks with separate Islamic Banking Branches with the total
branch net of 35 divisions functioning in thirteen cities of all the four provinces in the country (as of 31 March 2005)

The central bank is following a three-branched strategy to promote Islamic Banking in Pakistan

− founding fully functional Islamic banks in the private sector;
− establishment of divisions by the existing commercial banks; and
− permitting fully autonomous subdivisions for Islamic banking by the current commercial Banks.

For the sake of an overview the following key figures listed below taken from the report of Islamic Banking Summit on Islamic banking devices in Pakistan are as follows:

− Government of Pakistan Sovereign Sukuk – USD600 million 5year, Libor +220bps,
− Water & Power Development Authority Sukuk USD 133.33 million –Domestic Issue

− There are 36 Madarabas as on 2nd August 2006.
− Total assets of Modarabas – USD352.12 million &
paid-up capital of USD123.43 million as on 30 June 2005
− Net Profit Margins – 20.15%

− Till March 2006, Islamic Banking Deposit augmented to USD 1.3billion which is 2.8 of
the total deposit of the commercial banks
− Share of Islamic banking in the general banking structure increased to 2.1pc from

Mutual Funds (30 June 2005)
− Meezan Balanced Fund- total assets USD 24.3million
− Meezan Mutual Fund – total assets USD 29 million
− Meezan Islamic Fund – total assets USD 34.5 million
− Pakistan International Element Islamic Fund – total assets USD 22 billion

− Sitata Chemical Industries Ltd. – Musharakah based TFCs USD 6 million
− Al-Zamin Leasing Modaraba I tranch- Musharakah based TFCs USD 5 million
− Al-Zamin Leasing Modaraba II tranche – Musharakah based TFCs USD 5.42 million

The Government of Pakistan proposes to linger on endorsing Islamic Banking in the nation while trusting in its view its connections with the international economy & prevailing obligations to native & external financiers. There is a abundant necessity to improve devices for liquescence administration by banks & fiscal supervision by the SBP.