Introduction

Islam doesn’t see wealth as the finish line—it’s a tool. Its purpose is to help
families live with dignity, empower communities, and guide individuals toward a
life rooted in fairness and responsibility, that's why the success of Islamic banking
should not just be measured numbers like assets, deposits but by how well it
embodies deeper principles. Things like avoiding interest,gharar, risk sharing and
focusing on assets backed all these value's tie into the broader objectives of
Shariah.

The same thing happened during the 1960s and 1970s when many Muslim
communities felt a strong need to connect with the principles of Islam in different
aspects of life including finance in response to this growing sentiment, Dr Ahmad
El -Naggar took pioneering step and established an interest free banking Mit
Ghamr in Egypt.

In the same spirit Ayatollah Khomeini believed that the economy should reflect
Islamic values and principles. after the Islamic revolution, efforts were made in
Iran to reshape the economic system in line with Islamic teachings, Around the
same time similar ideas and discussions about establishing an Islamic economic
system were also gaining attention in Pakistan. Islamic banking has grown rapidly
over the past few decades as an alternative financial system that operates according
to Islamic principles. unlike conventional banking, Islamic banking emphasizes
fairness, transparency, risk sharing and for prohibition of interest. To ensure that
Islamic financial institutions remain compliant with Sharia principles several
regulatory and governance bodies have been established at both international and
national level .one of the most important organizations is the Accounting and
Auditing Organization for Islamic Financial Institution established in Bahrain in
1991, which develops, Shariah, accounting, auditing and governance standards for
Islamic financial institutions worldwide. in Pakistan the State Bank of Pakistan
further extends in the Islamic banking framework by establishing its Sharia board
in 2003 Nettler renamed the Shariah Advisory Committee (SAC) The SAC
provides guidance on Shariah related matters and supports the effective
implementation of Islamic banking regulations. in addition, Islamic banks have
their own Shariah boards or Sharia advisor who review and monitor banking
products and operations to ensure compliance with Islamic principles. these
governance mechanism helps strengthen the creditability of Islamic banking and
enhance public confidence in the authenticity of Shariah compliant financial
services.

Despite the efforts made by the State Bank of Pakistan and Government to
strengthen Shariah governance and promote Islamic banking, many customers still
have doubts about whether Islamic banks fully comply with Shariah principles.
these concerns continue to influence customers trust and may affect their
willingness to adopt Islamic banking services.

Trust in Islamic banking goes beyond perceptions of financial stability. if it also

This study is supported by the theory of planned behavior which provides a useful
framework for understanding customers adoption intention towards Islamic
banking services that's the foundation of the study is discussed in detail in the
literature review chapter.
Statement Of the Problem

The Islamic banking industry in Pakistan has experienced significant growth in recent years.
Report published by State Bank of Pakistan indicate continuous growth in Islamic banking
assets, deposits and market shares reflecting the increasing acceptance of Islamic banking service
among customers. (SBP 2025)

Despite this growth the State Bank of Pakistan continues to emphasize Shariah governance and
compliance through various regulatory framework and guidelines similarly international standard
setting bodies such as AAOFI and IFSB continue to promote effective Shariah compliance in
Islamic financial institution.

Previous studies conducted in Pakistan and other countries including Malaysia and Nigeria have
highlighted the importance of trust and Shariah compliance in influencing customers' acceptance
of Islamic banking. (Mohamed et al.,2011)

However limited empirical evidence exists regarding the combined influence of Shariah
compliance and trust on the acceptance of Islamic banking in Pakistan Therefore this study aims
to investigate the impact of Shariah compliance and trust on the acceptance of Islamic banking in
Pakistan. (Obaid et al.,2026) (Ezeh et al.,2025)

Research Objectives

To examine the impact of Shariah compliance and trust on the acceptance of Islamic banking

Research Questions

1-What is the impact Shariah compliance on customers adoption of Islamic banking

2- What is the impact of trust on customers adoption of Islamic banking

Research Hypothesis

1-Shariah compliance has a positive significant effect on acceptance of Islamic banking

2-Trust has a positive significant effect on acceptance of Islamic banking

RESEARCH GAP
The growth of Islamic banking in Pakistan has created a need to better understand the factors that
influence customer acceptance of Islamic banking services. Previous studies have highlighted the
importance of trust and a shariah compliance in shaping customers adoption decision (Butt at
el.,2025) Similarly (Obaid et al.,2026) identified as Shariah Trust Gap and emphasized the
importance of Transparency and effective Shariah practices in building customer confidences.
However limited research has examined the combined role of Shariah compliance and trust in
influencing Islamic banking acceptance. Therefore, the study aims to address the gap by focusing
on customers in Karachi Pakistan.

CHAPTER #2 LITERATURE REVIEW

Islamic banking concepts and background

In today's World, Trade financial transaction, and business practices have become more
complex and diverse compared to the past due to changing economic conditions. To address
these emerging challenges provides general principles that remain applicable across different
eras and societies. Islamic economic principles are based on the objectives of Sharia which
emphasize justice transparency public welfare and protection from exploitation.

The fundamental principle in Islamic finance is economic activities are permissible unless there
is clear evidence of prohibition. Therefore, business and financial transactions should be
conducted with mutual consent, fairness, and honesty among the parties involved. Moreover,
Islamic financial activities should avoid prohibited elements such as Riba,gharar,maysir,fraud,

And exploitation. These principles provide the foundation for standard banking practices and
shape customers' perceptions regarding the authenticity and credibility of Sharia compliant
financial services.

Trust

Shariah Compliance

Empirical literature Review

1-Article contrasting the drives of customer the satisfaction on image, trust and loyalty of
Muslims a Muslim's customers in Malaysia (Amin et al.,2013)
This theory focuses that Muslims feel satisfaction while banking services are Sharjah
Compliance while non-Muslims service prioritize service quality.

2- Sharjah Trust Gap article (Obaid et al., 2026)

here author point out that in Pakistan, how well Islamic banks follow shariah rules really shapes
how much people trust them and stay loyal. Bank can boost this trust by rolling out clear and
transparent policies. It's all about making things more open to customers and feeling confidence
in the long run.

3- In the Journal of Social Research and Development Article factors affecting customer
adoption of Islamic banking service Ali,Qayyum&Hussain(2023)

It shows that in Pakistan customers adopt Islamic banking not only because of religious trust in
Shariah compliance but also due to practical factors like service quality and convenience. So
Islamic bank must balance faith-based values with modern service expectations to build loyalty
so in simple trust in shariah compliance combined with strong service quality drives customer
loyalty in Islamic banking.
Research conducted in Nigeria, highlighted that when consumers perceive Islamic banking as
beneficial and compatible with their financial needs and values their trust in Islamic banks
increases This increased trust encourages customers to accept and adopt Islamic banking
services. similarly Nigerian studies have faced important questions regarding the role of trust in
the adoption of Islamic banking and how consumers confidence in Islamic banking institutions
influences their willingness to use Islamic banking products (Raharja and Setyawati 2018)