IESET.
Policies·pk_islamic_banking_framework_1981

Islamic banking / profit-loss-sharing framework (Pakistan 1981)

PAK·1981 – 1985·enacted 1981-01-01·Military government (Zia)candidate
movesfinancial deregulation↓rule of law↓

What the policy did

State Bank of Pakistan directive Jan 1981 required commercial banks to introduce profit-loss-sharing (PLS) deposit accounts alongside conventional accounts. By Jul 1985 all commercial bank funds (except fixed deposits existing before 1985) were to be on an interest-free basis. Banking Companies Ordinance amended 1984 to accommodate new instruments (Musharaka, Modaraba, Murabaha). Implementation widely described as 'interest by another name' — markup-financing dominated.

Policy-content fingerprint — what this policy moved, on which axes

Per invariant 3, reforms are scored by what they did on each channel-separated axis, not by the party that enacted them. This fingerprint is how the policy-match engine finds historical analogues.

intended
↓
financial deregulation
regulatory.financial_deregulation
Financial-sector regulation — banking separation, capital requirements, cross-border activity rules, derivatives oversight.
decreased · moderate
looser financial regulation
Reshaped banking-sector architecture with state-directed PLS instrument requirements — tighter regulation.
unintended / side-effect
↓
rule of law
institutional.rule_of_law
Rule of law as institutional substrate — contract enforcement, judicial independence, equal treatment before the law. Upstream of most other axes.
decreased · weak · unintended
weaker rule of law
Ambiguity over enforceability of interest contracts; later Riba rulings compounded uncertainty.

Enacted by

Empirical evidence — linked hypotheses

Explicit links are curated by the author. Inferred links are hypotheses in the library that test the same axes this policy moved — the framework's answer to "what does the data say about a policy like this?".

El Salvador's FDI inflow, real-GDP growth, tourism arrivals, and business-formation rate accelerated under the Bukele era (2019-2024) relative to a Central American peer-country donor pool (Honduras, Guatemala, Nicaragua, Costa Rica, Panama, Dominican Republic).
bukele_fdi_gdp_investment_climate_2019_2024inferred
viainstitutional.rule_of_law
PARTIAL — mean_gap=-0.697, |gap|/pre_sd=1.2, p_perm=1 (gap below 0.5×pre_sd or placebo p≥0.10)
partial
Across a pre-registered panel of OECD and major emerging-market economies from 1996 to 2023, stronger rule-of-law institutions predict deeper private credit intermediation after country and year fixed effects and basic macro controls.
market_order_rule_of_law_private_credit_depth_panelinferred
viainstitutional.rule_of_lawregulatory.financial_deregulation
PARTIAL — coef=+4.153, p=0.513 (above α=0.1); direction inconclusive
partial
Following El Salvador's perceived success with the régimen de excepción (March 2022 onward) and the homicide-rate collapse, multiple Latin American jurisdictions enacted Bukele-style emergency measures: Honduras (Estado de Excepción in select municipalities, December 2022), Ecuador (Estado de Excepción + designation of gangs as terrorist organisations, January 2024), Peru (Estado de Emergencia in Lima/Callao, 2023-).
latam_bukele_imitation_effect_homicide_security_stateinferred
viainstitutional.rule_of_lawregulatory.financial_deregulation
PARTIAL — ATT=+0.03571, p=0.598, N=99, treated_countries=1 (above α=0.10)
partial
Across countries 1990-2020, higher capital-account openness (proxied by EFW area-4 freedom-to-trade-internationally sub- components covering capital controls, plus IMF AREAER-derived binary capital-control intensity where available) predicts higher subsequent 10-year real per-capita GDP growth, conditional on initial income, rule-of-law level, trade openness, and financial- development depth.
liberal_capital_account_openness_growth_premium_panelinferred
viainstitutional.rule_of_lawregulatory.financial_deregulation
PARTIAL — coef=+1.115e-17, p=0.0255; effect magnitude effectively zero
partial
Major episodes of financial deregulation — the 1999 US Gramm-Leach- Bliley repeal of Glass-Steagall, the 1986 UK Financial Services Act ("Big Bang"), Chile's 1974-1981 banking liberalisation, Sweden's late-1980s credit-market liberalisation, and Japan's 1996-2001 Big Bang — are followed within 10 years by higher-than-baseline incidence of banking crises, measured by the Laeven-Valencia Systemic Banking Crisis Database, and by elevated credit-to-GDP gaps per BIS.
financial_deregulation_crisis_vulnerabilityinferred
viaregulatory.financial_deregulation
SUPPORTED — sign matches claim +, ATT=+0.04145, p=3.34e-07, N=302, treated_countries=8
supported
Across a pre-registered panel of OECD and major emerging-market economies from 1996 to 2023, stronger rule-of-law institutions predict faster real GDP per capita growth after country and year fixed effects and basic macro controls.
market_order_rule_of_law_gdp_pc_growth_panelinferred
viainstitutional.rule_of_law
PARTIAL — coef=-0.08348, p=0.913 (above α=0.1); direction inconclusive
partial
Across a pre-registered panel of OECD and major emerging-market economies from 1996 to 2023, stronger rule-of-law institutions predict higher high-technology export intensity after country and year fixed effects and basic macro controls.
market_order_rule_of_law_high_tech_exports_panelinferred
viainstitutional.rule_of_law
PARTIAL — coef=+0.621, p=0.746 (above α=0.1); direction inconclusive
partial
Across a pre-registered panel of OECD and major emerging-market economies from 1996 to 2023, stronger rule-of-law institutions predict higher private and total investment shares after country and year fixed effects and basic macro controls.
market_order_rule_of_law_investment_share_panelinferred
viainstitutional.rule_of_law
PARTIAL — coef=-0.3477, p=0.814 (above α=0.1); direction inconclusive
partial

Similar historical policies

Ranked by axis-fingerprint overlap with this policy. Direction match bolded — those are the closest historical analogues. Shape of the match is what drives policy-outcome comparison, not the country or party label.

Russian GKO default and rouble devaluation 1998
RUS·1998
match
1.4
rule of lawfinancial deregulation
RECADI multi-tier exchange-rate system (Venezuela, 1983)
VEN·1983
match
1.4
financial deregulationrule of law
Venezuelan exchange controls 1994-1996 (Régimen de Cambio)
VEN·1994
match
1.3
financial deregulationrule of law
Takenaka Plan / Program for Financial Revival (2002)
JPN·2002
match
1.1
financial deregulationrule of law
BDDK Banking Regulation and Supervision Agency establishment
TUR·1999
match
1.1
financial deregulationrule of law
Ventanilla siniestra — cocaine peso-laundering at BanRep (Colombia, late 1970s-1980s)
COL·1980
match
1.1
financial deregulationrule of law
Banking Royal Commission — Australia 2017-19
AUS·2017
match
1.0
financial deregulationrule of law
Saudi Capital Market Law (Royal Decree M/30)
SAU·2003
match
1.0
financial deregulationrule of law

References