KARACHI: The State Bank of Pakistan (SBP) is working with the government on the country’s transition to Islamic finance, as the government has adopted a clear strategy outlining how the banking system will become interest-free post-2027, SBP Governor Jameel Ahmad said on Wednesday.
The central bank is taking comprehensive measures to expand Islamic banking and is working closely with the government to align the country’s banking system fully with Islamic principles, Ahmad said at the National Islamic Economic Forum (NIEF) conference via video link.
He said that efforts are also underway to improve services for overseas Pakistanis sending remittances and to expand training for bankers and Sharia scholars.He added that the remittance system for overseas Pakistanis is being simplified; remittance inflows continue to increase; and a dedicated help desk has been established to address customer complaints.
The central bank’s chief noted that hybrid sukuk (Islamic bonds) instruments have been issued since April 16, and approval has also been granted for short-term sukuk. He said that Islamic banks have now been provided with an alternative to Treasury bills, and the country’s banking system is expected to move towards a fully Sharia-compliant financial structure in the future.
Deputy Governor SBP Saleem Ullah said about 29 percent of banking deposits and nearly 40 percent of financing in Pakistan had already shifted to Islamic banking. He said all new domestic loans issued from January 1, 2028, will be Sharia-compliant and that legal amendments required for the transition were expected to be completed by December 31, 2027. He expressed confidence that the remaining conventional banks will also transition to Islamic banking within the next 18 months.
Saleem Ullah further said that, wherever feasible, external borrowing will also be structured in accordance with Sharia principles. Bilal Bin Saqib, minister of state and chairperson of the Pakistan Virtual Assets Authority, said artificial intelligence and blockchain technology are reshaping the global economy and urged young Pakistanis to develop skills in programming, robotics and emerging technologies.
He said blockchain should not be viewed solely as the technology underpinning cryptocurrencies but also as a tool for improving transparency, protecting ownership records and reducing fraud. He added that digitising charitable donations and Zakat could strengthen transparency and accountability. Saqib noted that digital asset records stored on a blockchain can be verified by anyone anywhere in the world.
A resolution adopted unanimously at the conference urged that the five banks, among 16 that have not yet adopted Islamic banking, be converted by December 31, 2027, without exemptions. Participants said foreign banks operating in Pakistan should comply with the country’s banking laws.
Muhammad Bashir Farooqui, founder of Saylani Welfare International Trust, urged the government and the SBP to ensure that all commercial banks complete their transition to Islamic banking within the announced timeframe.
