KARACHI: The Islamic money market in Pakistan recorded a significant turnover of Rs142.6 billion on May 25, 2026. This reflects robust activity in Shariah-compliant instruments amid the expanding Islamic banking sector.
Market Breakdown and Key Transactions
Interbank and non-bank segments led the activity with Rs72.4 billion in Mudaraba and Musharaka deals. These spanned one-week to one-month tenors at weighted average returns of 11.25% to 11.30%.
Islamic banking channels showed strong internal liquidity flows. Transactions between Islamic banks and Islamic branches of conventional banks reached Rs38.4 billion, mostly through one-week Musharaka at 11.50%.
Expert Insights and Future Outlook
Experts view this as a positive sign for the evolving Islamic interbank market. It reduces reliance on conventional tools while preparing for the 2027 interest-free transition deadline.
Musharaka contracts dominated at 11.5%, highlighting banks’ preference for profit-sharing models in short-term liquidity management.
The data underscores growing institutional participation from mutual funds, insurance companies, and development finance institutions. This broad base strengthens the market’s depth and resilience.
No transactions occurred between Islamic entities and purely conventional banks during the period. This shows a clear shift toward dedicated Shariah-compliant channels.
Industry projections remain optimistic. Islamic banking assets are expected to reach Rs18-19 trillion by December 2026, up from Rs14.47 trillion. Deposits could hit Rs13.5-14.5 trillion while financing portfolio expands to Rs7-7.8 trillion. This momentum positions Islamic banking to capture 25-27% of total banking assets by year-end. The branch network is also set to grow significantly.
Such activity plays a vital role in liquidity management without interest-based instruments. It supports the sector’s sustainable growth trajectory in Pakistan’s financial landscape.