The Securities and Exchange Commission of Pakistan (SECP) has approved revisions to the Shariah screening criteria and methodology for the PSX-KMI All Share Index, aligning Pakistan’s Islamic equity benchmarks with international standards.
The regulator said the updated framework aims to strengthen investor confidence in Shariah-compliant capital market instruments and support the development of Pakistan’s Islamic capital market.
The decision followed a high-level meeting of the Committee on the Post-2027 Financial Sector Strategy chaired by the Finance Secretary, which reviewed progress on transitioning Pakistan’s financial system toward a riba-free framework in line with the Federal Shariat Court ruling.
Officials directed SECP to prepare a comprehensive plan for transforming all SECP regulated sectors into Shariah-compliant models and to develop a post-2027 strategy to sustain the transition. The reforms form part of SECP’s Strategic Action Plan 2024-26 for expanding Islamic finance across regulated sectors.
Under the revised criteria, the non-compliant debt-to-total assets ratio for index inclusion has been reduced from 37% to 33%, reflecting the growing availability of Shariah-compliant financing and closer alignment with global practices.
SECP has also introduced a Shariah compliance rating mechanism, assigning three-, four-, or five-star ratings to qualifying companies to improve transparency and help investors assess compliance levels.
The list of Shariah compliant companies for the PSX-KMI All Share Index will now be published with a five-working-day objection window, allowing stakeholders to submit evidence-based revision requests. A mechanism has also been added for the interim inclusion of newly listed firms, subject to screening and approval by the KMI Index Committee.
- SECP has advised the Pakistan Stock Exchange (PSX) to consider additional measures, including:
- Reducing the non-compliant investments-to-total assets ratio from 33% to 30%
- Introducing quarterly index updates
- Automating data collection and screening processes
Under the Shariah Governance Regulations 2023, methodologies for Shariah-compliant securities require SECP approval. Accordingly, PSX, Al‑Meezan Investment Management Limited, and Meezan Bank Limited jointly submitted the PSX-KMI All Share Index methodology, which SECP approved in May 2024.
The revised framework is expected to encourage listed companies to adopt Shariah-compliant capital structures and facilitate informed investment decisions in Pakistan’s growing Islamic equity market.
