Revolutionizing Islamic Finance: The Impact of Islamic Banks on Car Ijarah Financing in Pakistan

Abstract

Pakistan is one of the countries that has contributed significantly to Islamic Banking and Finance growth. During the past few years, the Islamic financial sector has experienced significant growth, with an annual growth rate of over 31%. Currently, Pakistan's Islamic banking sector holds almost 11% of market share (SBP: Strategic Strategy for Islamic Banking Sector of Pakistan 2019-2023). The most popular form of Islamic financing is Car Ijarah financing, which accounted for 8.6% of overall financing from the beginning of the year until December 2022 (SPB-IBB-Dec 2022). Pakistan had five full-fledged Islamic banks as of December 31, 2022, as well as 561 Islamic financial divisions in conventional banks (Islamic Banking Strategy and Guidelines Division, SBP). This study analyzes the development of Ijarah financing. Thus, for their contextual research, experts selected Meezan Bank, the largest Islamic bank in the world. An independent variable is Car Ijarah Security Deposit (CISD), Car Ijarah Charities (CJC), Car Ijarah Inventories (CII), while a dependent variable is Net Car Ijarah Financing (NCJF). During the extended period from (2019–2023), data are derived from Islamic banks' financial statements (secondary source). As a result, each coefficient's size is indicated. Using the coefficients, Meezan Bank's net Ijarah financing was estimated. Meezan Bank's size had a significant impact on its net Ijarah financing, suggesting that it had a substantial impact on the bank's success.