Feb. 26, 2026 | Karachi
Pakistan’s financial regulator announced on Thursday that it has revised the screening criteria for companies listed on the Pakistan Stock Exchange (PSX) to enhance compliance with Shariah principles, a move aimed at bolstering investor confidence in Islamic finance instruments.
The Securities and Exchange Commission of Pakistan (SECP) said the updated framework will apply to the PSX-KMI All Share Index, which tracks the performance of Shariah-compliant companies listed on the PSX. The index is designed to provide a transparent benchmark for investors seeking interest-free and Islamic-compliant investment options.
“The revised framework is expected to support the development of the Islamic capital market, facilitate informed investment decisions, and encourage listed companies to adopt Shariah-compliant capital structures,” the SECP said in a statement.
Under the new criteria, the non-compliant debt-to-total assets ratio for eligible companies has been reduced from 37 percent to 33 percent. In addition, a Shariah compliance rating mechanism has been introduced, assigning three, four, or five-star ratings to qualifying companies. The ratings aim to enhance transparency and enable investors to assess the degree of Shariah adherence of listed firms.
The regulator also announced a process for publishing the list of Shariah-compliant companies in the PSX-KMI All Share Index, allowing a five-working-day objection window for evidence-based revision requests. Interim inclusion of newly listed companies is also permitted, subject to review and approval by the KMI Index Committee.
Further enhancements are under consideration, including reducing the non-compliant investments-to-total assets ratio from 33 percent to 30 percent, implementing quarterly index updates, and automating data collection to improve efficiency, the SECP said.
Islamic finance has grown significantly in Pakistan and globally, with Middle Eastern and Southeast Asian countries leveraging Shariah-compliant instruments to attract savings and investments. Pakistani authorities view the sector as a tool to broaden financial inclusion, cultivate a savings culture, and offer alternatives to interest-based products.
Data from the Central Directorate of National Savings shows that Islamic finance inflows totaled Rs23.6 billion ($84 million) between July 1, 2025, and Jan. 23, 2026, nearing the institution’s Rs25 billion ($89 million) target for the current fiscal year ending in June. Officials attribute this growth to rising demand for interest-free investment options.
“The sector has the potential to significantly transform the financial landscape in Pakistan by providing ethical, interest-free avenues for both retail and institutional investors,” said a Karachi-based financial analyst familiar with the SECP reforms.
The revisions are part of Pakistan’s broader effort to implement the Federal Shariat Court’s 2024 directive to phase out “riba” or interest from the country’s financial system by Jan. 1, 2028. Officials said the updated index criteria mark a critical step toward achieving that target while strengthening market confidence.
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