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.
 


Pakistan says it is targeting militant infrastructure in Afghanistan as Kabul threatens to hit Islamabad

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Pakistan says it is targeting militant infrastructure in Afghanistan as Kabul threatens to hit Islamabad

  • Ata Tarar says Pakistan is carrying out ‘precise intelligence-based operations’ to avoid civilian casualties
  • Afghan defense minister says the underlying dispute between the two sides is over the ‘Durand Line’ border

ISLAMABAD: Pakistan said on Saturday it was conducting intelligence-based operations against militant infrastructure inside Afghanistan while attempting to avoid civilian casualties, as a senior Afghan Taliban official warned Kabul could retaliate by targeting Islamabad if Pakistani forces struck the Afghan capital.

The escalating rhetoric comes as cross-border fighting between the two neighbors intensifies following clashes that began last month when Afghan forces launched attacks on Pakistani military installations along the frontier. Kabul said the assault was retaliation for Pakistani airstrikes targeting what Islamabad called militant camps inside Afghanistan.

Pakistan’s defense minister Khawaja Muhammad Asif said last week the situation had effectively become “open war” between the two countries.

“Pakistan is only targeting terrorist infrastructures and support system with precise intelligence based operations ensuring no collateral damage takes place,” Pakistan’s Information Minister Ataullah Tarar said in a statement.

He challenged the recent claims made by an Afghan defense ministry spokesperson earlier this week who said his country was making significant battlefield gains against Pakistan including the killing of 109 soldiers and the capture or destruction of 14 military posts in large scale attacks.

“These so called attacks by Afghan Taliban in coordination with FAK [Fitna Al Khawarij] Terrorists once again confirm the nexus of Afghan Taliban regime and multiple terrorist organizations operating from within their territory,” Tarar continued. “All such attempts are responded to, immediately and effectively with severe retributive punishment that is swift, precise and effective.”

“The imaginary numbers being floated by Afghan Taliban regime are however not worth any serious comment,” he added.

Tarar said Pakistan’s military campaign — described as Operation Ghazb Lil Haq — had inflicted heavy losses on Afghan Taliban forces.

According to figures shared by the minister, 527 Taliban fighters had been killed and more than 755 injured since the clashes began, while 237 check posts were destroyed and 38 captured and destroyed. He said 205 tanks, armored vehicles and artillery guns were destroyed and 62 locations across Afghanistan had been targeted by air strikes.

Arab News could not independently verify the claims made by either side.

CIVILIAN CASUALTIES

Earlier this week, the United Nations raised concern over the toll of the escalating conflict on civilians.

UN human rights chief Volker Turk said on Friday that 56 Afghan civilians — nearly half of them children — had been killed since hostilities between Pakistan and Afghanistan intensified.

However, Tarar questioned the UN findings, saying its assertions appeared to rely heavily on information provided by Taliban authorities and did not adequately reflect independently verified intelligence.

“Pakistan categorically reiterates that all counter-terrorism operations conducted by its security forces are carried out with the highest degree of precision, professionalism, and responsibility,” he said.

Islamabad has long accused the Taliban government of allowing militant groups, including the Tehreek-e-Taliban Pakistan (TTP), to operate from Afghan soil, a charge Kabul denies.

“Operations are meticulously planned so that civilian areas remain completely safe,” the minister said. “The locations targeted are remote terrorist hideouts and facilities far removed from populated zones, including sensitive areas such as Kabul’s Green Zone.”

AFGHAN WARNING

Meanwhile, Afghanistan’s Defense Minister Mullah Yaqoob issued a warning to Pakistan in remarks circulated by Afghan broadcaster TOLOnews.

“If Kabul lacks peace, there will be no peace in Islamabad. If Kabul is attacked, Islamabad will be attacked,” Yaqoob said in a promotional clip of an interview shared on social media.

Yaqoob rejected Pakistan’s justification that the presence of the TTP in Afghanistan warranted military action and suggested the underlying dispute was over the contested “Durand Line” border between the two countries.

So far, there has been no official response from Pakistan to Yaqoob’s remarks.