United Bank Limited (PSX: UBL) has successfully converted all its branches in Khyber Pakhtunkhwa (KP) and Balochistan to Islamic banking, in line with Pakistan’s legislative shift toward a fully Shariah-compliant financial system.
This transition follows the National Assembly’s December 2024 law mandating the transformation of the entire banking sector to Islamic banking by 2027. The legislation responds to the Federal Shariat Court’s directive to eliminate riba (interest) from Pakistan’s financial system.
UBL’s move highlights the increasing significance of Islamic finance in Pakistan. By mid-2023, Islamic banking assets had reached Rs. 7.2 trillion, accounting for 21 percent of the total banking industry, according to the State Bank of Pakistan (SBP). Deposits in Islamic banks amounted to Rs. 5.8 trillion, making up nearly 23 percent of the country’s total banking deposits.
Currently, only five out of Pakistan’s 42 commercial banks operate entirely as Islamic institutions. The conversion process for conventional banks involves significant restructuring, including adjustments to loan portfolios, staff training, and developing Sharia-compliant financial products.
To facilitate this shift, the SBP has rolled out a Transformation Plan (2023-2027), offering technical support and incentives to ensure a smooth transition for all banks.
UBL’s initiative reinforces the growing momentum within Pakistan’s banking sector to adopt Islamic finance principles, paving the way for a fully Shariah-compliant banking system by 2027.
