SBP to offer fresh remittance incentives

Moves to riba-free system, Sukuk issuances hit Rs1.8tr as Islamic banking grows to 29%

KARACHI:

State Bank of Pakistan (SBP) Governor Jameel Ahmad has said the central bank will soon introduce a new incentive scheme to encourage higher remittance inflows, as a steering committee actively works to facilitate the country's transition to Islamic banking.

Addressing the National Islamic Forum on Wednesday, Ahmad said the SBP was aligning its regulatory framework with Shariah principles and international standards, particularly those of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

Ahmad said Pakistan's objective had always been to establish a fully Islamic banking system. The government has laid out a clear roadmap for implementing a complete Islamic banking system by December 2027.

The government has accelerated Sukuk issuance, raising Rs1.8 trillion through a hybrid Sukuk launched on April 16, 2026. In collaboration with the Pakistan Stock Exchange, the SBP has also introduced short-term hybrid Sukuk, mobilising Rs239 billion.

Ahmad said there was a need for greater capacity building among bankers and Shariah scholars, adding that the SBP was collaborating with religious seminaries and universities to promote Islamic banking education.

He urged conference participants to compile recommendations so stakeholders could jointly address challenges facing the sector.

Ahmad also said the central bank was working to improve banking facilities for freelancers. He noted that Pakistan's foreign exchange reserves had reached $41.6 billion last year and said additional facilities would be introduced for overseas Pakistanis sending remittances. A dedicated help desk had also been established to address complaints.

"Our objective is to ensure the banking system operates in accordance with Islamic principles," he said. Ahmad said the SBP had approved a short-term Sukuk framework, providing Islamic banks with an alternative to Treasury bills. The issuance of short-term hybrid Sukuk would also help establish a market benchmark.

SBP Deputy Governor Saleem Ullah said the Islamic finance model benefited people of all faiths. He said the fundamental purpose of any economic system was public welfare, and the Islamic economic system provided a robust framework for achieving that objective. Saleem Ullah said Islamic banking now accounted for 29% of Pakistan's banking industry, while 40% of lending was being carried out under Islamic banking and 44% of bank branches had become Shariah-compliant.

He said the most significant progress had been made over the past two months, with the government unveiling its post-2027 financial system strategy in June. "It is encouraging that the government itself has issued the post-2027 strategy," he said.

Saleem Ullah said that from January 1, 2028, all domestic borrowing would be conducted under the Islamic banking system. The government had also committed to ensuring Shariah compliance in external borrowing and pledged to fulfil all commitments by December 31, 2027. Upon maturity, conventional bonds and loans would be converted into Shariah-compliant instruments instead of being rolled over. He added that 20 out of 40 relevant laws had already been reviewed, with amendments to the remaining legislation to be completed before December 31, 2027. The government also plans to establish a registry company to which leasable federal assets would be transferred, enabling improved structuring and mobilisation of financing.