Pakistan’s Islamic finance sector gathers pace as state savings body nears annual target

A money changer counts Pakistan's currency at a market in Karachi on January 6, 2023. (AFP/File)
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Updated 26 January 2026
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Pakistan’s Islamic finance sector gathers pace as state savings body nears annual target

  • State savings body mobilized nearly 94 percent of its annual Islamic finance target in the first seven months of FY2025–26
  • Shariah-compliant bonds and savings certificates drive demand as Pakistan expands interest-free financial options

ISLAMABAD: Pakistan’s Islamic finance sector is gaining momentum as the country’s main state-run savings institution reported strong inflows into Shariah-compliant products, the APP news agency reported on Monday, reflecting rising demand for interest-free investment options in the world’s second-largest Muslim-majority country.

The Central Directorate of National Savings (CDNS) recorded Rs23.6 billion ($84 million) in Islamic finance inflows between July 1, 2025, and Jan. 23, 2026, the APP report said. The performance brings the institution close to its Rs25 billion ($89 million) Islamic finance target for the ongoing fiscal year ending in June.

A senior CDNS official described the growth as a sign of increasing investor confidence in Shariah-compliant savings instruments, which prohibit interest and emphasize ethical investment principles.

“We have revived and reinforced our focus on Islamic finance during the current fiscal year, which is expected to support sustainable growth of Pakistan’s Islamic economy,” the official was quoted as saying by APP.

He said the issuance of Islamic bonds and Shariah-compliant savings certificates had played a central role in attracting investors seeking halal returns, while also helping mobilize long-term national savings.

The latest inflows build on CDNS’s recent expansion in Islamic finance. In the previous fiscal year 2024–25, the directorate met its Islamic investment target of Rs24 billion ($86 million). Earlier, in FY2023–24, it mobilized around Rs75 billion ($268 million) through Islamic bonds alone, laying the groundwork for broader institutional reforms and product diversification.

Islamic finance has become a significant part of the global financial system, with countries across the Middle East and Southeast Asia using Shariah-compliant instruments to attract savings and investment. In Pakistan, officials see the sector as a way to broaden financial inclusion, promote a savings culture, and offer alternatives to conventional interest-based products.

Beyond Islamic finance, CDNS has also posted strong overall savings performance. By the end of Dec. 2025, it had mobilized Rs700 billion ($2.5 billion) toward its total savings target for the current fiscal year, APP reported.

The institution is undergoing reforms aimed at digitizing services, improving efficiency and introducing new financial products to meet changing investor needs.
 


Four militants, three paramilitary personnel killed in Pakistan's restive northwest

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Four militants, three paramilitary personnel killed in Pakistan's restive northwest

  • The troops were killed when militants targeted an ambulance transporting them after a quadcopter attack on a paramilitary camp in Karak
  • Pakistan is witnessing a surge in militancy in its western regions, which last week prompted Islamabad to conduct airstrikes in Afghanistan

ISLAMABAD: Four militants and three paramilitary personnel were killed in separate incidents in Pakistan's northwestern Khyber Pakhtunkhwa (KP) province, authorities said on Monday, amid a surge in militancy in the region bordering Afghanistan.

Security forces conducted an intelligence-based operation in KP's Dera Ismail Khan district on reports about militant presence, according to the Inter-Services Public Relations (ISPR), the military's media wing.

An intense exchange of fire followed between the two sides and four Pakistani Taliban militants were killed during the operation.

“Weapons and ammunition were also recovered from Indian sponsored killed Khwarij (Pakistani Taliban militants), who remained actively involved in numerous terrorist activities in the area,” the ISPR said.

“Sanitization operation is being conducted to eliminate any other Indian-sponsored kharji found in the area.”

New Delhi did not immediately respond to the Pakistani military's statement.

In the second incident, militants gunned down three personnel of the Federal Constabulary (FC) paramilitary force after a quadcopter attack on an FC camp in KP's Karak district, a police official said on Monday.

The explosive-laden quadcopter struck the FC camp in the Bahadur Khel area early Monday morning and injured seven FC troops, according to Karak police spokesperson Shaukat Khan.

Three FC personnel were killed when militants attacked a Rescue 1122 ambulance which was transporting the injured troops to a hospital following the attack.

“With this incident, the total number of FC personnel martyred has risen to three, while five others, including a member of the rescue team, were injured,” Khan told Arab News.

“A search operation is currently underway to trace those responsible.”

No group immediately claimed responsibility for the attack, but Pakistani officials have said in the past that armed groups, particularly the Pakistani Taliban, have been increasingly using commercial drones modified to drop explosives, alongside other weapons they say were acquired after the US military withdrawal from neighboring Afghanistan.

Pakistan is witnessing a surge in militancy in its northwestern KP and southwestern Balochistan provinces that border Afghanistan. Islamabad accuses Afghanistan of allowing the use of its soil and India of backing militant groups for cross-border attacks against Pakistan. Kabul and New Delhi deny this.

On Sunday, Pakistani security forces killed five militants, including a suicide bomber, during an intelligence-based operation in the country’s southwestern Balochistan province, the military’s media wing said. The operation took place in Balochistan’s Pishin district after security forces received reports about the presence of Pakistani Taliban militants.

The Pakistani Taliban, or the Tehreek-e-Taliban Pakistan (TTP), have carried out some of the deadliest attacks against civilians and law enforcement agencies in Pakistan since 2007 in their bid to impose their own brand of Islamic law in the country.

Pakistan also carried out intelligence-based strikes on alleged militant camps and hideouts in Afghanistan’s Nangarhar, Paktika and Khost provinces on Saturday, a security official said. The official said more than 80 militants were killed in the attacks, a claim denied by the Afghan Taliban who said Islamabad killed and wounded dozens of civilians in the strikes.

The strikes have increased tensions between the neighbors, with Afghanistan warning it will retaliate at a “suitable time.”