SECP lowers non-Shariah debt limit to 33% in index overhaul

February 26, 2026 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has revised the Shariah screening criteria for the PSX-KMI All Share Index, lowering the threshold for non-Shariah-compliant debt from 37% to 33% as part of broader reforms aimed at strengthening Islamic capital markets and supporting Pakistan’s transition to a Riba-free financial system by 2027.

Under the revised framework, the regulator has also proposed reducing the limit for non-Shariah-compliant investments from 33% to 30%.

In addition, companies qualifying for the Shariah-compliant index will be assigned 3, 4, and 5-star ratings to enhance transparency and help investors better assess compliance levels, according to a press release issued.

The revisions are part of the SECP’s broader Strategic Action Plan 2024-26 to promote Islamic finance across all regulated sectors, in line with the Federal Shariat Court’s ruling and the 26th Constitutional Amendment mandating the phased elimination of riba by 2027.

A five-working-day objection window will allow evidence-based requests for revision, while newly listed companies may be included on an interim basis subject to screening and approval by the KMI Index Committee.

Additional measures under consideration include reducing the non-compliant investments-to-total assets ratio from 33% to 30%, updating the index quarterly, and automating data collection to facilitate investor transparency and compliance monitoring.

The methodology for the PSX-KMI All Share Index was jointly submitted by PSX, Al-Meezan Investment Management Limited, and Meezan Bank Limited, and approved by SECP in May 2024

The SECP said the updated Shariah index has been aligned with international standards, a move expected to boost investor confidence in Shariah-compliant shares.

A new mechanism has also been introduced to allow interim inclusion of newly listed companies into the Shariah index, ensuring timely participation of eligible firms.

Furthermore, the Pakistan Stock Exchange has been directed to update the list of Islamic indices on a quarterly basis.

The regulator emphasized that comprehensive measures are underway to transform the non-banking finance and capital markets into a Riba-free system, reinforcing Pakistan’s broader Islamic finance objectives.

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