Opportunities in Pakistan’s Islamic finance growth

Explore how Pakistan’s shift to Shariah-compliant finance unlocks opportunities in Sukuk, trade, and ESG-linked growth for corporates, FIs, and investors.

25 September 2025

4 mins

Corporate & investment bankingFinancial institutions and investor groupsGlobal banking

The original article written by Azhar Aslam is featured on The News

In April 2022, Pakistan’s Federal Shariah Court issued a historic ruling directing the country’s financial system to shift fully towards Islamic banking. This milestone reflects a growing recognition: Shariah-compliant finance is not only a religious imperative but also an economic opportunity.

Globally, Islamic finance has grown into a USD 5.5 trillion industry and is projected to reach USD 7.5 trillion by 2028. Pakistan has the chance to position itself as a leader in this transformation, provided the right policies, products, and infrastructure are in place. At Standard Chartered Saadiq, we see this as a pivotal moment to help shape a resilient, inclusive financial system.

Unlocking domestic liquidity through Sukuk

Pakistan’s government borrowing currently amounts to about PKR 45.5 trillion, but only 12.5% is raised via Sukuk – with the rest through conventional instruments like T-bills and PIBs. Expanding Sukuk issuance is critical for deepening Pakistan’s Islamic capital market.

Shariah-compliant government securities, both tradeable and non-tradeable, can mobilise untapped domestic liquidity. Standard Chartered Saadiq is already working with the State Bank of Pakistan and other stakeholders to explore asset-backed Sukuk and “asset-lite” structures that can accelerate this shift.

Building the right legal and regulatory ecosystem

For Islamic banking in Pakistan to thrive, a supportive institutional framework is essential. This includes:

• Standardising contracts and governance models.
• Aligning Shariah boards and regulatory bodies.
• Strengthening oversight across banks, insurance firms, and asset managers.

Drawing on our global experience across Asia, the Middle East, and Africa, Standard Chartered Saadiq is actively engaging policymakers to ensure reforms are practical, scalable, and internationally credible.

Strengthening cross-border connectivity

One of the biggest challenges is bridging Pakistan’s Islamic finance system with the global economy, where conventional banking still dominates. To succeed, Pakistan must scale up:

• Shariah-compliant trade finance for cross-border flows.
• International Sukuk issuance for foreign investors.
• Liquidity management tools that align with Islamic principles.

Standard Chartered’s global footprint allows us to connect Pakistan with international Islamic capital markets, creating opportunities for corporates, financial institutions, and investors seeking Shariah-compliant solutions.

Expanding beyond traditional products

The next phase of growth requires broadening the product suite. Beyond Sukuk, the market must deliver:

• Murabaha and Istisna structures for trade and supply chain finance.
• Interest-free liquidity solutions, including Shariah-compliant cash pooling.
• ESG-linked and Green Sukuk, vital for Pakistan’s sustainability agenda.

By innovating in these areas, Pakistan can make Islamic finance not only compliant but also competitive and forward-looking.

Human capital: The missing link

A successful transition depends on people as much as products. Currently, there is a disconnect between academic teaching and industry needs – with limited focus on practical product design, regulation, and risk management.

Partnerships between universities, regulators, and financial institutions are needed to create a new generation of professionals who are well-versed in both Shariah law and modern financial practices.