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.
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.