| Abstract: |
Purpose — The study documents the performance of the Islamic banking services
industry (IBSI) in light of the Islamic finance objectives, notably financial
stability, equitable distribution of wealth, and social responsibility.
Design/Methodology/Approach — After drawing the performance evaluation
framework based on the objectives, the research conducts a balance sheet
analysis of the IBSI in Pakistan for 32 quarters (2013Q4–2021Q3). The analysis
examines sources and uses of funds by looking at the application of financial
contracts and sectoral distribution of financing. Objectively classified data
trends are reported through graphs. Findings — Findings suggest that the
domestic IBSI has shown progress in achieving primary and intermediate
objectives, including commercial performance, contribution to equitable wealth
distribution, and financial stability. However, the industry’s in-practice
business models lack any significant contribution to the social sector, which
represents a more advanced objective. Originality/Value — The contributions to
the literature include development of a performance evaluation framework based
on Islamic finance objectives, and documentation of findings on the IBSI’s
achievements in Pakistan. Research Implications — The study recommends that
regulators develop a legal framework for business models of the IBSI. It also
recommends that managers of domestic Islamic banks include the social sector
as well as agricultural and rural areas in financing and investment portfolios. |