Shariah-compliant securities reach 65.2% of PSX market cap

Pakistan’s Islamic finance industry recorded growth across capital markets, mutual funds and pension savings during the fiscal year ended June 30, 2026, with the government raising PKR 3.14 trillion through sovereign sukuk auctions, according to a report by the Securities and Exchange Commission of Pakistan.

Shariah-compliant securities listed on the Pakistan Stock Exchange had a market capitalization of PKR 13.17 trillion as of June 30, equivalent to 65.2% of the exchange’s total PKR 20.20 trillion market capitalization, the SECP said in its Islamic Finance Bulletin covering July 2025 to June 2026.

How large is Islamic finance in Pakistan’s capital market?

Shariah-compliant securities accounted for nearly two-thirds of the PSX’s total market capitalization at the end of June, while 309 of 537 listed securities were Shariah-compliant. Islamic finance also expanded through sovereign and corporate sukuk, mutual funds, pension funds and REITs, underscoring its growing presence across Pakistan’s capital markets.

The 309 Shariah-compliant securities represented 57.5% of all securities listed on the exchange.

The report highlighted expanding corporate demand for Islamic financing, growing investor confidence in Shariah-compliant instruments and the introduction of new instruments to diversify government borrowing.

Government raises PKR 3.14 trillion through sukuk

The government raised PKR 3.14 trillion through 18 sovereign sukuk auctions conducted on the PSX platform during FY2025-26, using different maturities and fixed- and floating-rate structures.

Cumulative debt raised through the issuance and listing of government sukuk on the PSX reached PKR 5.97 trillion between December 2023 and June 2026, according to the SECP.

Hybrid sukuk, introduced by the government in April 2026, raised PKR 1.28 trillion during the fourth quarter. The instrument combined Ijarah Sale and Lease Back and Commodity Murabaha structures, with 55% of the proceeds allocated to the former and 45% to the latter.

Hybrid sukuk accounted for approximately 40.8% of the government’s total sukuk fundraising during the fiscal year, marking a diversification of its Islamic financing strategy.

The government raised PKR 1.86 trillion through Ijarah sukuk during the first three quarters of FY2025-26. No Ijarah sukuk were issued in the fourth quarter, when the hybrid structure was introduced.

The SECP said the use of the PSX platform enabled the government to raise funds through a transparent, market-driven mechanism while supporting public debt management.

Corporate sukuk issuances rise 41.2%

Pakistan’s corporate sukuk market also expanded, with the SECP certifying the Shariah structures of 72 issuances worth a combined PKR 307.64 billion during FY2025-26.

The number of certified issuances increased 41.2% from the previous fiscal year, while their total issuance value rose 13.6%, the report said.

Corporate sukuk certifications reached their highest level in five years, rising from 28 in FY2021-22 to 72 in FY2025-26. Their total value more than doubled over the same period, from PKR 146 billion to PKR 307.64 billion.

The cumulative value of the 228 corporate sukuk certified by the SECP through June 2026 reached PKR 1.33 trillion.

Private placements continued to dominate the market, with 71 of the 72 certified sukuk privately placed and only one listed on the PSX.

Shirkat-ul-Aqd sukuk accounted for PKR 282.8 billion, or 91.9% of the total value certified during the year. Other structures included Diminishing Musharaka, Modaraba, Musawama and Murabaha.

The report said the growing number and value of corporate sukuk reflected increasing corporate reliance on Shariah-compliant financing and rising investor confidence in Islamic financial instruments.

Islamic mutual funds outnumber conventional funds

Shariah-compliant mutual funds outnumbered conventional mutual funds for the first time, with 197 Islamic funds compared with 192 conventional funds as of June 30.

Assets under management in Shariah-compliant mutual funds grew 27.6% during FY2025-26 to PKR 2.20 trillion, accounting for 49% of the mutual fund industry’s total assets.

Islamic pension fund assets increased 48.1% during the fiscal year to PKR 107.62 billion, representing 65.4% of the pension fund industry’s assets.

Shariah-compliant real estate investment trusts had total assets of PKR 234.79 billion, accounting for 94.5% of the REIT industry’s assets as of June 30.

The modaraba sector reported total assets of PKR 72.16 billion, equivalent to 3.1% of nonbanking finance industry assets excluding mutual funds and pension funds.

The SECP said the expansion of Islamic mutual funds and pension products indicated growing adoption of Shariah-compliant investment and retirement solutions.

Takaful contributions record double-digit growth

The latest available takaful figures showed family, or life, contributions increasing 23% in calendar 2025, while the general, or non-life, segment recorded growth of 32.9%.

Overall takaful contributions increased 26.2% to PKR 122.4 billion from PKR 97 billion a year earlier. The figures cover calendar 2025 rather than FY2025-26.

Takaful provides insurance coverage through arrangements structured to comply with Islamic principles.

The SECP also certified two private funds as Shariah-compliant for the first time during FY2025-26, marking an initial step toward developing a Shariah-compliant market for private equity and venture capital funds.

Burj Clean Energy Modaraba became the first modaraba to issue sukuk, raising PKR 700 million through a green sukuk in October 2025.

The regulator also approved the Shariah-compliant window model for 22 securities brokers during the final quarter of the fiscal year. As of June 30, two full-fledged Shariah-compliant securities brokers and 22 brokers offering Shariah-compliant window operations together covered more than 50% of market volume.

New products and regulatory initiatives

Other developments included the first approval of a Shariah-compliant credit risk-sharing product, development of an Islamic liquidity management model and revisions to the screening process for companies included in the PSX-KMI All Share Index.

The SECP also issued reports on Shariah-compliant digital and agricultural financing, along with a guidebook for lending nonbanking finance companies.

The initiatives formed part of the regulator’s efforts to expand Islamic finance across capital markets and nonbanking financial services.

The report’s findings show that Islamic finance has become a substantial component of Pakistan’s listed equity market, investment funds and government borrowing. However, adoption differs across segments, with Shariah-compliant pension funds and REITs accounting for large shares of their respective industries while corporate sukuk activity remains heavily concentrated in private placements.