Pakistan’s microfinance sector is steadily moving to transform its operations from conventional banking practices into Sharia-compliant Islamic finance, aligning with constitutional requirements and evolving market demand. This shift, led by both microfinance banks and institutions, represents a significant step toward expanding financial inclusion in a way that resonates with the country’s cultural and religious values.
The development was confirmed by Muhammad Amir Khan, Chairman of the Pakistan Microfinance Network (PMN) and CEO of HBL Microfinance Bank, during a press briefing at a local hotel. The briefing was held to announce the Pakistan Microfinance Network and UNIDO 9th Annual Microfinance Conference, which will bring together key stakeholders to discuss the sector’s future direction.
Khan explained that several microfinance banks have already introduced Islamic financial products and modules, while others are in different stages of converting their operations to comply fully with Sharia principles. To ensure credibility and compliance, all institutions undergoing the transition have engaged Sharia scholars and experts who will oversee the gradual phasing out of interest-based systems. This step is expected to create stronger trust among customers who previously hesitated to engage with conventional microfinance services due to religious concerns.
Highlighting the importance of this transformation, Khan emphasized that the annual conference will provide a national platform to reflect on the achievements of the last two decades while reimagining the sector’s role in the years ahead. He stated that by leveraging innovation, strengthening strategic partnerships, and ensuring broader financial inclusion, microfinance institutions can become central to Pakistan’s economic transformation, social justice efforts, and sustainable development goals.
The conference will address a wide range of thematic areas, including agriculture and rural finance, climate risk and adaptation strategies, women’s financial inclusion, blended finance to support SMEs and rural enterprises, partnerships between microfinance players and fintech companies, and the growing need for inclusive insurance solutions. These discussions are expected to frame how microfinance can continue to address systemic challenges while fostering resilience in underserved communities.
PMN CEO Syed Mohsin further elaborated on the sector’s future ambitions, noting that the collective target is to expand services to 40 million customers across Pakistan. He stressed that rural areas, particularly farmers and women, must remain a focal point of outreach. By reaching these segments, the sector can not only improve financial inclusion but also strengthen grassroots economic activity.
Mohsin also highlighted ongoing efforts under the World Bank’s $125 million support program, which is helping microfinance institutions enhance liquidity and improve customer services. This initiative is part of a broader financial empowerment program aimed at boosting the sector’s capacity to meet rising demand while addressing systemic vulnerabilities.
Despite facing recent challenges, including damage from severe flooding in rural areas, microfinance banks have continued their mission of supporting financial empowerment. According to Mohsin, institutions are actively working to help affected communities rebuild and restore their economic stability through targeted lending, recovery programs, and enhanced customer support.
The transition of microfinance operations to an Islamic framework is not only a compliance requirement but also a strategic move that aligns with customer expectations and national policy objectives. By embedding Sharia-compliant practices into the sector, Pakistan is setting the foundation for a more inclusive, resilient, and trusted financial system that bridges cultural values with modern financial innovation.
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