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Pakistan Mandates Sharia-Compliant Banking for Domestic Lenders by 2028, Grants Foreign Banks Flexibility

New regulations require Pakistani banks to fully adopt Islamic finance models, while foreign banks can continue offering conventional services.

Jul 7, 2026, 6:04 AM Nikkei Asia

Islamictopic Pakistantopic Domestic Lendersperson Grants Foreign Banks Flexibilitytopic Pakistan Mandates Sharia-Compliant Bankingtopic Pakistanitopic ISLAMABADorganization Nikkei Asiaorganization Reutersorganization

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The Pakistani government has announced a significant banking reform requiring all domestically owned banks to operate under a fully sharia-compliant model by 2028. This move aims to eliminate interest-based finance within the country's banking sector.

However, foreign banks operating in Pakistan will be allowed to continue offering non-Islamic financial services alongside sharia-compliant ones. This regulatory distinction may provide foreign banks with a competitive advantage over domestic lenders.

The reform marks a major shift in Pakistan's financial landscape as it moves toward Islamic banking principles.

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Nikkei Asia (via Reuters)

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Pakistan gives foreign banks an edge in shift to Islamic finance

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Nikkei Asia Captured Jul 7, 2026, 5:56 AM · Original story

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