Fahad UsmanFollow

Degree

Master of Science in Finance

Department

Department of Finance

School

School of Business Studies (SBS)

Date of Submission

Summer 2025

Supervisor

Dr. Saqib Sharif, Associate Professor, Department of Finance

Project Type

Research Project

Document Type

Restricted Access

Pages

vi, 39

Keywords

Keywords: Islamic banking, banks’ transformation, Pakistan, Shariah compliance, qualitative study

Abstract

The transformation of traditional banks to the Islamic banks is spreading across the world, but in Pakistan, the case has taken longer to turn out no matter how great the need is to have Shariah compliant services. This study examines the major obstacles towards conversion. With the aid of exploratory qualitative research design, a total of six semi-structured interviews were carried out among the banking professionals, regulators and the Shariah scholars working in the Islamic banks or engaged in conversion process. Relevant expertise was guaranteed by using purposive sampling. Thematic analysis revealed four main themes of these challenges namely operational constraints (lack of human resources, system transformation, product redesign), institutional and environmental barriers (readiness to launch into the market, resistance by stakeholders), financial constraints (expensive conversion costs, profitability issues) and regulatory complexities (dual governance, ambiguities in compliance). Although Islamic banking provides prospects of ethical fit and market development, it is vital to overcome such obstacles through concerted policies, capacity strengthening, and education and enlightenment. The study also offers suggestions to financial institutions for smooth transitioning towards Islamic banking in Pakistan.

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