Abstract

This article discusses the move for conversion of a conventional bank into Islamic one taking the Bank of Khyber (BoK), Pakistan as a case study. It provides an in-depth and emprical narrative of how Islamic banking has been introduced at the Bank of Khyber particularly motivated by political and social incentives to reconstruct the current conventional banking model. Initially, BoK was operating on conventional model of financial intermediation and gradually, an Islamic banking division, a Shari‘ah Board, and multiple Islamic depository and financing processes have been introduced and institutionalized to establish social and political legitimacy within the context. The narrative article highlights the core challenges to the BoK team and value creation of the institutional intervention, particularly shared value creation and collaborative efforts across the industry, from an institutional theory perspective. The narrative carries multiple implications for the Islamic banking professionals and offers practical insights on the process of business model reconstruction within the context of Islamic banking.

Keywords

Islamic Banking, Financial Intermediation, Institutional Theory