Journal of Islamic Banking and Finance December 2015, Vol. 3, No. 2, pp. 91-96 ISSN 2374-2666 (Print) 2374-2658 (Online) Copyright © The Author(s). All Rights Reserved. Published by American Research Institute for Policy Development DOI: 10.15640/jibf.v3n2a9 URL: http://dx.doi.org/10.15640/jibf.v3n2a9 E volutionary Islamic Banking Service Karim Ullah 1 Abstract This paper develops a conceptual framework that explains how an Islamic banking product (can) evolves into various and heterogeneous service practices in different contexts of its application. In theory, there is an argument that a service should continuously evolve into various practice environments to fulfil the requirements of various contexts and thus sustain. In practice also, the regulators such as the State Bank of Pakistan adopted an evolutionary regulatory framework that calls for designing and development of Islamic banking products that evolve into the emergent market needs. The proposed framework in this paper, describes a five steps evolution in an Islamic banking product, namely i) Model Contracts ii) Bank-level specifications iii) Branch-level Specifications; iv) Customer-level specifications v) and Feedback E volution. The framework advances our understanding of how an Islamic banking product does or should evolve into to the practice environments of banks to effectively enact the evolutionary regulatory frameworks in the Islamic banking industry. Keywords: Islamic Banking, Product, E volutionary, Regulatory Framework. 1. Introduction In different regions, Islamic banking is operating in various revolutionary or evolutionary regulatory frameworks (SBP, 2008). A revolutionary regulatory framework prefers to apply centrally designed structures to overall Islamic banking industry to be followed firmly to establish a planned system of desire. It is more like a prescriptive framework, which is adopted by Pakistan in the early 1980s to islamise the Islamic banking sector (SBP, 2008). Pakistan was not sufficiently successful with this framework in its first attempt (SBP, 2008 and 2010), as only 4 percent of the Islamic banking sector in transformed. In contrast, the evolutionary framework establishes a system that transforms itself gradually through insights from experiences from actual practice. Since 2003, Pakistan also adopted an evolutionary framework to re-establish the Islamic banking after having a dissatisfactory outcome of the revolutionary regime (Saeed, 2012). Within the current evolutionary framework an Islamic banking, an institution continuously adapts their products to create islamically acceptable services to tackle the constant innovations, compete in local and global markets, and remain compliant with Shariah (Moin, 2008). The adaptation is the process of change in the contents of a service product in compliance with the Shariah. The Islamic products design strategies should also vary and fit within the broad Islamic finance regulatory frameworks. In UAE and Bahrain the process is entirely left to the financial institutions. In Sudan, the government provides some guidelines (SBP, 2010). In UK the Financial Services Authority (FSA) treats the Islamic finance as similar to conventional finance with no special favours or obstacles (Ainley et al., 2007). The State Bank of Pakistan’s strategy in Pakistan is unique and is based on the experience it gained from the earlier launch of Islamic finance (SBP, 2010). 1 Dr. Karim Ullah, Assistant Professor, Centre for E xcellence in Islamic Finance, Institute of Management Sciences, 1-A, Sector E -5, Phase VII, Hayatabad, Peshawar- Pakistan. 0092-091-9217408, E xt. 206, K arim.Ullah@ imsciences.edu.pk .