What Is Islamic Banking?
Islamic banking is a banking system that operates in line with Islamic Shariah principles. It is not simply “interest-free banking” that description only captures one part of the picture.
According to the State Bank of Pakistan, Islamic banking avoids three categories of prohibited activity:
What replaces these is a system based on tangible assets, real services and shared risk. The SBP describes the model as a “transformation of conventional money lending into transactions based on tangible assets and real services.” Profit is linked to performance, not to the simple passage of time.
This distinction matters practically. In a conventional bank, you deposit money and earn interest regardless of what the bank does with it. In an Islamic bank, your funds are deployed through Shariah-compliant structures and your return depends on the outcome of those arrangements.
How Islamic Banking Is Regulated in Pakistan
The State Bank of Pakistan established a dedicated Islamic Finance Department and a Shariah Board to govern all Islamic banking activity in the country. The regulatory framework broadly covers:
- Licensing of full-fledged Islamic banks and conventional banks offering Islamic banking windows
- Approval of Shariah-compliant financial instruments
- Shariah compliance reviews and audits
- Issuance of guidelines on Islamic modes of financing
The SBP’s Shariah Advisory Committee has reviewed and approved the essentials of Islamic modes of financing — circulated as guidelines to all banks conducting Islamic banking business in Pakistan:
Allied Aitebar operates under this regulatory framework. It has its own Shariah Advisory Committee, the members of which are listed on the Allied Aitebar website, and all products are reviewed for Shariah compliance before being offered to customers.
Islamic Banking vs Conventional Banking: The Core Differences
If you are deciding between Islamic vs Conventional Banking, here’s what makes them different and how these services work:
| Feature | Conventional Banking | Islamic Banking |
|---|---|---|
| Return on deposits | Fixed interest rate | Variable profit share based on the bank’s earnings |
| Lending model | Interest-bearing loan | Asset-backed financing (Murabaha, Ijarah, Musharakah) |
| Risk | Borne entirely by borrower | Shared between bank and customer |
| Prohibited elements | None | Riba, Gharar, Haram subject matter |
| Shariah oversight | Not applicable | Mandatory Shariah Board |
| Profit guarantee | Yes (fixed rate) | No — profit rates are variable |
The Main Islamic Modes of Finance in Pakistan
Understanding the underlying contracts helps you evaluate any Islamic banking product you are considering.
A cost-plus-profit sale arrangement. The bank purchases a specific asset and sells it to the customer at an agreed price, payable in instalments. The price is fixed at the outset — no interest accumulates over time. Widely used for vehicle, consumer, and trade financing.
An Islamic lease arrangement. The bank purchases an asset and leases it to the customer for an agreed period. Ownership remains with the bank during the lease; the customer pays rent. At the end of the term, ownership will be transferred with a separate contract. Used for car financing and equipment leasing.
A shared ownership arrangement. Both the bank and the customer contribute capital to a venture or asset purchase. Profit is shared in agreed proportions and losses as per investment share. Used for home financing under the diminishing Musharakah model, where the customer gradually buys out the bank’s share.
A profit-sharing arrangement. One party provides capital (Rab-ul-Maal) and the other provides expertise and management (Mudarib). Profit is shared as agreed; financial loss is borne by the capital provider. The basis for most Islamic savings and investment accounts.
Forward purchase arrangements used primarily in agriculture and manufacturing finance, respectively. Salam involves a full advance payment for a commodity to be delivered later. Istisna is used for custom-manufactured goods, with payment and delivery both deferred or staggered.
Allied Aitebar: Allied Bank's Islamic Banking Arm
Allied Aitebar is the Islamic banking division of Allied Bank Limited. It won Best Islamic Digital Bank at the Euromoney Islamic Finance Awards 2025 a recognition of both product depth and digital delivery.
Allied Aitebar offers Shariah-compliant alternatives across every major banking category. Below is a structured overview of what’s available.
Islamic Deposit Accounts
Current Accounts
Islamic current accounts operate on a Qard basis — no profit is paid, and the full amount is guaranteed. They function identically to conventional current accounts for day-to-day transactions.
A standard Islamic current account is suitable for everyday banking needs. There’s no minimum balance requirement under the basic tier. Moreover, it is perfect for salaried individuals, traders and businesses that manage regular inflows and outflows.
If you are a student or have limited documentation, the Allied Islamic Asaan Current Account is the most suitable one. It has simplified the Know Your Customer (KYC) requirements to open an account. This is accessible to a wider segment of the population, including first-time account holders. Moreover, you can open this account without any proof of income or salary slips.
An Islamic basic banking account is a no-frills account for customers who need a functional banking relationship without complex requirements. Aligned with SBP’s financial inclusion mandate.
Home remittance beneficiary customers who need fast, straightforward account opening with standard features can opt for the Aitebar Express account.
Savings Accounts
Islamic savings accounts operate on a Mudarabah basis. The bank pools deposited funds and invests them in Shariah-compliant assets. Profits are distributed to depositors based on a declared profit-sharing ratio and the bank’s actual earnings. Profit rates are variable — they change each month based on the pool’s performance.
The Allied Islamic Saving Account operates under the Mudarabah contract, meaning all returns are profit-based, and deposits are channelled into Shariah-compliant financing — never into interest-bearing instruments.
There is no minimum balance requirement, profit is calculated monthly and shared semi-annually, and an initial deposit starts from just PKR 100. Standard benefits include a free cheque book, myABL Internet Banking, a Visa Debit Card, and local and foreign remittance facilities.
The Allied Islamic Asaan Saving Account is a simplified, low-barrier product that supports the SBP’s financial inclusion goals by requiring minimal documentation and no complex eligibility criteria. Operating on the Mudarabah model, it is accessible to first-time account holders, low-income savers, and anyone entering formal banking for the first time.
The Allied Islamic Anmol Plus Account is a Mudarabah-based product that can be opened with an initial deposit of just PKR 1,000. Customers sustaining a monthly minimum balance of PKR 100,000 or above unlock complimentary services, including free Allied Banker Cheque (ABC) issuance, cancellation, and duplicate issuance of ABC and Call Deposit Receipt (CDR).
The Allied Islamic Khalis Munafa Account offers a transparent profit distribution model with multi-tier balance/profit structures (i.e. amount/slab-wise profit rate). All returns are generated through Shariah-compliant financing, and the account comes with full access to Allied Bank’s digital banking suite — a straightforward, riba-free savings option for rate-sensitive depositors who value simplicity.
The Allied Aitebar Premium Account is designed for customers seeking premium profit rates and an elevated level of service. It is best-suited to depositors who maintain substantial balances and expect both competitive halal returns on a tiered-based structure, i.e. amount/slab-wise profit rates and dedicated support as part of their Allied Aitebar banking relationship.
The Allied Aitebar Institutions Account is built for institutional depositors — including Banking Financial Institutions (BFIs) and Non-Banking Financial Institutions (NBFIs) opened with an initial deposit of PKR 10 Million and above, that need a structured, Shariah-compliant home for their funds. It combines the governance requirements of organisational banking with the principles of Islamic finance.
Islamic Exclusive Accounts
The Allied Aitebar Khanum Account is a Shariah-compliant account designed exclusively for the female segment, offering dedicated banking features and eligibility for the broader Allied Aitebar Khanum Services suite of benefits.
The Allied Aitebar Senior Citizen Account is tailored for customers aged 55 and above, offering competitive profit rates and features suited to those managing retirement income or savings in a Shariah-compliant framework.
The Allied Islamic Youth Account is designed for customers aged 18–35, combining accessible entry requirements with a Shariah-compliant structure. Available in both Regular and Asaan variants, it is a practical first account for young Pakistanis who want halal banking from the start.
The Allied Aitebar Rising Star Account is a children’s savings account for parents and guardians saving toward a child’s future, structured on a Mudarabah basis to ensure every rupee grows in a fully riba-free environment.
The Allied Aitebar Waseela-e-Hajj and Umrah Account is a dedicated savings account for customers planning Hajj or Umrah, allowing systematic savings over time in a structured, Shariah-compliant framework — without resorting to interest-based financing.
The Allied Aitebar Salary Management Account is for salaried employees whose organisations disburse salaries through Allied Islamic Business Plus, combining the convenience of a payroll account with full Shariah compliance so that monthly income is received and managed riba-free from day one.
The Allied Aitebar Asaan Remittance Account is designed for overseas Pakistanis and domestic remittance beneficiaries who need a simple, Shariah-compliant account to receive inward transfers — with minimal documentation barriers and full alignment with Islamic banking principles.
Allied Islamic Investment Certificates (Term Deposits)
Allied Islamic investment certificates are the Shariah-compliant equivalent of term deposits. Rather than a fixed interest rate, they operate on a Mudarabah basis — you commit funds for a fixed period and receive a share of the profits declared for that respective term. Weightages are declared in advance but are not guaranteed, since actual profit rates are declared on a monthly basis.
Allied Aitebar Behtar Munafa Certificate
The Allied Aitebar Behtar Munafa Certificate is a high-yield short-term Islamic investment certificate for customers who can lock in funds for a defined tenure, with profit rates declared on a monthly basis.
Allied Islamic Express Plus 1 AIIC
The Allied Islamic Express Plus 1 AIIC is a short-term Islamic investment certificate for Allied Aitebar Express account holders who want competitive returns without long lock-in periods.
You can view all the profit rates for all Allied Aitebar investment products at Islamic Banking Profit Rates.
Islamic Consumer Finance
Islamic Financing Options
Allied Aitebar Home Musharakah is a home financing based on diminishing Musharakah — Allied Aitebar and the customer jointly purchase the property, the customer uses the bank’s share and pays rent on the bank’s share while gradually buying it out, and full ownership transfers at the end of the tenure with no interest involved at any stage.
The Wazir-e-Azam Apna Ghar Program is also available through Allied Aitebar in its Islamic variant, bringing subsidised home finance within reach for low-to-middle income Pakistanis on a Shariah-compliant basis.
Allied Aitebar Car Ijarah is vehicle financing, structured as an Islamic lease. Allied Aitebar purchases the vehicle and leases it to the customer, with monthly payments covering rent rather than loan repayment, and ownership transferring at the end of the term through a separate contract.
Allied Aitebar Solar System Finance is Shariah-compliant financing for rooftop solar installations, allowing customers to reduce their electricity bills and invest in renewable energy without entering a conventional loan arrangement.
Allied Aitebar Business Finance provides working capital and asset financing for SMEs structured on Shariah-compliant modes, suitable for trading, manufacturing, and service businesses that need liquidity or capital expenditure support without conventional debt.
Islamic Agriculture Finance
Allied Aitebar Tractor Financing is a Shariah-compliant agriculture development finance facility, based on the Diminishing Musharakah model. It is designed to assist farmers in purchasing brand-new tractors at competitive rates for agricultural use.
Allied Aitebar Hari Bhari Agriculture Financing is a revolving Murabaha credit facility for crop production costs — seeds, fertiliser, and other inputs — suited to farmers who need seasonal working capital without conventional interest-based arrangements.
Allied Aitebar Agriculture Finance — Dairy Farming is Shariah-compliant financing for working capital requirements and dairy farm development, covering livestock purchase, shed construction, and equipment for farmers expanding their operations.
Allied Aitebar Aabayari is financing for irrigation infrastructure — including tube wells and water management systems — structured to help farmers invest in water security without a conventional loan.
Islamic Insurance – Banca Takaful
Banca Takaful — Islamic Insurance
Takaful is a Shariah-compliant alternative to conventional insurance based on the principles of mutual assistance, cooperation, shared responsibility, and risk sharing. Participants contribute to a common fund (Tabarru’) to mutually support one another against covered risks, with eligible claims paid from the fund in accordance with Islamic principles, thereby providing financial protection to its participants.
Pak-Qatar Regular Takaful and Savings Plan
The Pak-Qatar Regular Takaful and Savings Plan is a savings and investment-linked Family Takaful product that allows participants to save and invest in a Shariah-compliant manner while benefiting from takaful protection and long-term financial planning support.
Jubilee Super Shield Takaful Plan
The Jubilee Super Shield Takaful Plan is a Shariah-compliant unit-linked Takaful plan that combines savings and investment with life protection, helping participants plan for future financial needs while safeguarding their family’s financial well-being.
Islamic Banking for Overseas Pakistanis
Overseas Pakistanis can access Allied Aitebar's products through the Roshan Digital Account framework. The Allied Aitebar Roshan Digital Account allows non-resident Pakistanis to open and operate a Shariah-compliant account entirely online no branch visit required with access to Islamic savings and investment products, remittance receipt, and a path to Shariah-compliant home and car financing in Pakistan.
How to Open an Allied Aitebar Account
At a Branch or Islamic Banking Window
Visit any Allied Aitebar branch or an Islamic banking window at a conventional Allied Bank branch. Bring your original CNIC (Computerised National Identity Card) and any additional documents required for the specific account type.
Through the myABL App
Existing Allied Bank customers can explore and access Allied Aitebar products through the myABL app. Download it from the Google Play Store, Apple App Store or Huawei AppGallery.
Online — for Overseas Pakistanis
Non-resident Pakistanis can apply for the Allied Aitebar Roshan Digital Account at rda.abl.com.
Frequently Asked Questions
Q. What is the difference between profit in Islamic banking and interest in conventional banking?
In a conventional bank, interest is a fixed, pre-agreed return on a loan — it accrues regardless of how the borrowed money is used or whether the underlying venture is profitable. In Islamic banking, profit is earned through actual economic activity — trade, leasing or investment — and is shared based on real outcomes. The bank takes on a degree of risk alongside the customer, which is what makes the return Shariah-compliant.
Q. Are Islamic banking profit rates guaranteed?
No. Profit rates on Islamic savings and investment accounts are variable. Weightages and profit-sharing ratios are declared in advance based on expected earnings but are subject to change each month depending on the performance of the Mudarabah pool. Hence, the profit rates are not guaranteed, but are declared on a monthly basis.
Q. Is the Roshan Digital Account available in an Islamic version?
Yes. The Allied Aitebar Roshan Digital Account is a fully Shariah-compliant version of the Roshan Digital Account, available to overseas Pakistanis through the online portal. If you're ready to move your banking to a Shariah-compliant framework, you can explore the full range of Allied Aitebar products at abl.com/islamic — or walk into any Allied Aitebar branch with your CNIC to get started today.