Central bank sets target to increase Pakistan’s Islamic banking share to 35 percent by 2025

The logo of the State Bank of Pakistan (SBP) is pictured on a reception desk at the head office in Karachi, Pakistan July 16, 2019. (REUTERS/FILE)
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Updated 18 January 2023
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Central bank sets target to increase Pakistan’s Islamic banking share to 35 percent by 2025

  • Federal Shariat Court has set December 2027 as deadline to eliminate interest-based banking in Pakistan
  • At present, the share of Islamic banking in the overall commercial banking system in the country is 20 percent

KARACHI: Pakistan’s central bank has set a target to increase the share of Islamic banking in the country to 35 percent by 2025, the state bank’s deputy governor said on Tuesday, as the national financial institution takes measures to promote interest-free banking in the country. 

In 2021, the Federal Shariat Court (FSC), which determines whether Pakistani laws comply with Islamic law, directed the government to eliminate interest from the country’s banking system by 2027. 

At present, the share of Islamic banking in the overall commercial banking system in the country is 20 percent. Pakistan has six full-fledged Islamic banks offering a wide range of products and the annual growth rate of Islamic banks’ assets and deposits has been 25 percent and 22 percent respectively over the last five years, according to central bank data.

In November, Finance Minister Ishaq Dar said a dedicated wing would soon be established at the State Bank of Pakistan (SBP) to ensure the country’s transformation into an interest-free economy to comply with a ruling of the Federal Shariat Court.

“We are introducing a strategy to increase the share of Islamic banking to 35 percent in the next two years and then increase it beyond that,” SBP deputy governor, Sima Kamil, told reporters after the first HabibMetro Sirat Islamic Banking Summit held in Karachi.

“Simultaneously we are also looking at the court’s judgment, along with the government, for the promotion of Islamic banking.”

Kamil added that the central bank would facilitate and allow the conversion of conventional banking branches to the Islamic banking system.

“Finance is a fundamental pre-requisite for growth of any economy and Islamic finance by virtue of its faith-based nature offers inherent synergies with risk and reward mechanisms,” Kamil said.

However, she admitted that the availability of “adequate” financial experts was a key challenge facing the central bank in transforming conventional banks to the Islamic banking system. 
 
“There is a growing need for qualified Islamic finance professionals who can spearhead the financial industry to the next stage,” Kamil said, adding that the central bank was fully committed to providing all support and facilitation that banks would need during the conversion process.
 


Pakistan law minister urges media caution on foreign policy debate amid Middle East tensions

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Pakistan law minister urges media caution on foreign policy debate amid Middle East tensions

  • Azam Nazeer Tarar says constitutional limits must be respected when discussing diplomatic matters
  • He says people can express themselves but sensitive external issues fall outside freedom of expression

ISLAMABAD: Federal Minister for Law and Justice Azam Nazeer Tarar urged journalists on Tuesday to exercise caution when discussing the country’s foreign policy, saying constitutional limits must be respected as regional tensions rise following the escalating conflict in the Middle East.

Tarar said citizens have the right to receive accurate information and express their views, but warned that public debate on sensitive diplomatic matters could cross constitutional boundaries and trigger legal consequences.

His remarks come as tensions in the Gulf have intensified after coordinated strikes by the United States and Israel against Iran on Feb. 28, followed by retaliatory Iranian attacks targeting American bases and infrastructure in several Arab states.

The crisis has complicated diplomatic balancing for countries such as Pakistan that maintain ties across the region.

“Journalism is such a profession, and particularly given the way information flows today, it is the right of every person living in Pakistan that correct information should reach them, and every individual also has the right to express what is in their heart,” Tarar told the media.

“However, we cannot ignore constitutional limits and restrictions,” he said, adding that criticism often arises when authorities register criminal cases or initiate prosecution after those limits were crossed.

The minister said debate that frames Pakistan’s foreign policy choices in binary terms — such as whether the country stands with Iran or Gulf states — risks undermining delicate diplomatic relations.

He maintained even the Constitution of Pakistan does not permit people to casually comment on such issues, adding that the public should trust the state in managing these matters.

“Your constitution, which is the fundamental document and the social contract with the state, the agreement between the state and its citizens about how life is to be conducted here, also obliges you to exercise great caution in such discussions and commentary, as they do not fall within the bounds of freedom of expression,” he said.

The remarks come amid debate in the country about limits of online free speech, as authorities frequently invoked the Prevention of Electronic Crimes Act (PECA) to pursue cases related to digital content.

Critics say the law has been used to curb dissent and intimidate journalists and activists, while the government maintains it is necessary to combat misinformation, cybercrime and threats to national security.

Tarar said legal action should not automatically be viewed as excessive if authorities enforce constitutional limits.

“Every profession also has a basic responsibility to conduct itself within the limits of the law,” he added.