The Securities and Exchange Commission of Pakistan (SECP) has introduced a major regulatory initiative aimed at accelerating the growth of Shariah-compliant financial markets in Pakistan. In line with the constitutional requirement to eliminate riba from the economy, the SECP has issued directives mandating licensed entities to adopt Shariah-compliant brokerage services in a phased manner.
The new framework will impact a wide range of institutional investors and intermediaries operating under SECP’s regulatory ambit. This includes takaful operators, window takaful operators, non-banking finance companies, collective investment schemes, voluntary pension schemes, modarabas, modaraba management companies, private funds, and securities brokers. These entities are now required to gradually shift their securities trading activities toward Shariah-compliant brokers.
The rollout is structured in two phases to allow for smooth adaptation. Under the first phase, all affected institutional investors must design and approve an internal policy on Shariah-compliant trading by December 31, 2025. Starting March 31, 2026, they will also be required to submit quarterly progress reports to the SECP, detailing implementation milestones and highlighting any operational challenges. By June 30, 2026, each entity must ensure that at least one Shariah-compliant broker is added to its panel of approved intermediaries.
The second phase, spanning from July 1, 2026, to June 30, 2027, sets a more ambitious benchmark. During this period, institutional investors will be required to route no less than 20 percent of their securities trading business through Shariah-compliant brokers. After this phase, the SECP will review the outcomes both at the entity level and sector-wide to decide on the next steps, which may include expanding the proportion of trades that must be conducted through Shariah-compliant intermediaries.
In addition to brokerage reforms, the SECP has strongly encouraged licensed entities to adopt other Shariah-compliant services. These include switching to takaful for insurance needs and utilizing Shariah-compliant asset management firms for investment purposes. The regulator emphasized that the transition is not just about compliance but also about promoting a broader ecosystem for Islamic finance in Pakistan.
The SECP has also directed the Pakistan Stock Exchange (PSX) to play a central role in this transition. The exchange has been instructed to design and implement a robust Shariah-compliant trading mechanism, while also raising awareness among market participants about the benefits and availability of Shariah-based brokerage services. Trading Rights Entitlement (TRE) Certificate Holders have been asked to provide these services by either fully converting to Shariah compliance, setting up subsidiaries, or offering window operations dedicated to Islamic trading.
Meanwhile, the Central Depository Company (CDC) has been tasked with ensuring greater visibility for Shariah-compliant intermediaries. It has been asked to create a dedicated category on its digital platforms, including Asaan Connect and Emlaak Financials. In coordination with the State Bank of Pakistan (SBP), these platforms will also be integrated with the digital applications of Islamic banks, making it easier for investors to identify and engage with Shariah-compliant financial services.
Market experts view this move as a decisive step toward mainstreaming Islamic finance within Pakistan’s capital markets. By setting measurable goals and timelines, the SECP is aiming to create a more inclusive financial system that aligns with both investor demand and constitutional obligations. The phased structure ensures that institutions have sufficient time to build capacity, while regulators and market infrastructure bodies work in tandem to create a supportive environment.
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