Banks extended Rs. 873 billion in net financing to Pakistan’s private sector during the current fiscal year through July 12, up 29 percent from Rs. 676 billion in the corresponding period last year, according to the latest data released by the State Bank of Pakistan (SBP).

The increase in credit comes despite the SBP’s policy rate remaining at 11.5 percent, indicating that businesses continue to seek financing for expansion, working capital, liquidity needs, and refinancing.

The latest data also highlights a major shift toward Islamic banking. Full-fledged Islamic banks provided Rs. 160 billion in net financing during the period, compared with Rs. 347 billion a year earlier. However, Islamic banking divisions of conventional banks sharply increased lending to Rs. 729 billion, up from Rs. 140 billion in the same period last year.

In contrast, conventional banking operations recorded a net retirement of Rs. 17.6 billion in private sector loans, reversing the Rs. 187 billion in net lending reported during the corresponding period of the previous fiscal year.

Analysts said the lending pattern reflects the banking sector’s accelerating transition toward Shariah-compliant financing. Conventional banks are increasingly expanding their Islamic banking operations to meet growing customer demand, in line with Pakistan’s broader move toward an interest-free banking system.