Since 9/11 Pakistani madrasas have been known as ‘terrorist factories’ and ‘universities of jihad’. A number of policy papers and media reports published by Pakistani and international experts, have asserted strong links between madrasas and militancy. The bulk of the literature is characterized by a one-sided focus on the link between madrasas and militancy, scrutinizing the madrasas to explore this link. A more constructive way to look at the ‘madrasa challenge’, one that could have broader policy implications, would be examine the diversity of schools existing in this sector, both in terms of size, financing, theological/ideological positions and links to political groups. What policy measures can be taken to promote the development of moderate madrasas? How could these best be supported? This project takes stock of the madrasa debate and the reform process.