State Bank of Pakistan (SBP) Deputy Governor Saleem Ullah emphasized on Tuesday the need for a fundamental restructuring of Pakistan’s banking system to achieve a genuine Islamic economic model. Speaking at the 8th International Conference on Islamic Banking and Finance, hosted by the Institute of Business Management (IoBM), he underscored that creating a real Islamic financial system demands more than merely adapting conventional banking products to meet Sharia standards.
“We need to move past offering Sharia-compliant versions of traditional banking products and instead establish a true Sharia-based alternative,” he said. Saleem Ullah emphasized that Pakistan’s goal is to build a financial system rooted in authentic Islamic values, one that aligns with the country’s commitment to the principles of Islamic finance.
This push toward a purely Islamic financial system follows the recent passage of the 26th constitutional amendment bill by Pakistan’s parliament, which mandates the elimination of all forms of interest (riba) by January 1, 2028. This legislative step is anticipated to accelerate the adoption of Islamic banking nationwide.
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In recent years, Pakistan’s Islamic banking sector has shown robust growth. As per SBP data, by the end of June 2024, assets in Islamic banking institutions (IBIs) surged by 19.3% to reach Rs9.69 trillion. Deposits within the Islamic banking sector also saw a substantial increase of 25.4%, totaling Rs7.363 trillion in FY24.
Highlighting the ethical foundation of Islamic finance, the deputy governor stressed that this system avoids partnerships with businesses that harm the environment and adheres strictly to Islamic principles. “Overhauling our banking system is vital to achieving the shared goal of a true Islamic economy, where ethical and moral considerations are at the core,” he stated.
Former SBP Governor Dr. Ishrat Husain also addressed the conference, calling for cohesive action from the banking and financial sectors to uphold Islamic finance principles. He cautioned that a fragmented approach could weaken the foundation of Islamic banking. Additionally, Dr. Husain criticized the country’s tax system, labeling it as arbitrary and regressive, which, in his view, penalizes honest taxpayers while enabling tax evasion and other malpractice.
Talib Karim, President of IoBM, emphasized the role of educational institutions in this transformation, asserting that training future leaders to support a shift from conventional to Islamic financial models is essential. He acknowledged the current challenge posed by a shortage of skilled professionals in Islamic finance and called for focused efforts to develop the necessary expertise.
As Pakistan moves closer to realizing its Islamic economic vision, leaders across the financial sector underscore the importance of cohesive policy reforms, education, and systemic changes to create a sustainable and ethically aligned financial future.
