United Bank Limited (UBL) has announced the complete conversion of all its branches in Khyber Pakhtunkhwa and Balochistan to Islamic banking, in line with Pakistan’s recent push to transition the entire banking sector to Shariah compliance by 2027. The bank confirmed the development in an emailed statement on Tuesday.
The transformation follows the passage of a law by the National Assembly in December 2024, mandating all conventional banks to shift to Islamic banking. This legislation stems from the Federal Shariat Court’s directive to eliminate riba (interest) from the financial system.
As of 2023, Pakistan’s Islamic finance sector accounted for 21% of the total banking industry. According to the State Bank of Pakistan (SBP), Islamic banking assets reached Rs. 7.2 trillion by mid-2023, reflecting a 24% year-on-year increase. Deposits in Islamic banks also rose to Rs. 5.8 trillion, representing nearly 23% of the country’s total banking deposits.
Currently, only 5 of Pakistan’s 42 commercial banks operate as fully Islamic institutions. The conversion of conventional banks, such as UBL, involves significant restructuring, including adjustments to loan portfolios, staff training, and the development of Sharia-compliant financial products.
To facilitate this transition, the SBP has introduced a comprehensive Transformation Plan (2023-2027), offering technical guidance and incentives to ensure a smooth shift to Islamic banking across the sector. The plan aims to support banks in meeting the legal requirements and achieving full compliance with Shariah principles.
