KARACHI: In a significant move to align Pakistan’s capital market with global Islamic finance standards, the Securities and Exchange Commission of Pakistan (SECP) has revised the Shariah screening criteria for the PSX-KMI All Share Index. The regulator has announced a reduction in the non-Shariah debt limit for companies, bringing it down from 37% to 33%. This adjustment is part of a broader strategy to ensure the market transitions toward a Riba-free economy by 2027.
The SECP has further proposed lowering the limit for non-Shariah compliant investments from 33% to 30%. To enhance transparency and investor confidence, companies in the Shariah-compliant index will now be assigned 3, 4, and 5-star ratings based on their level of compliance. Additionally, a new mechanism has been introduced for the interim inclusion of newly listed companies into the Shariah Index, ensuring they meet the required standards from the outset. The SECP stated that these changes are designed to harmonize the Shariah-compliant index with international benchmarks, thereby strengthening investor trust in Shariah-compliant equities.
According to the SECP, these measures are integral to the national goal of eliminating Riba from the financial system by 2027. The Pakistan Stock Exchange (PSX) will now update the Shariah indices list on a quarterly basis. Furthermore, comprehensive steps are being taken to transform the Non-Banking Finance (NBF) sector and the wider capital market into a fully Shariah-compliant ecosystem.
