KARACHI:
Islamic money market transactions amounted to Rs142.6 billion for May 25, 2026, with activity distributed across multiple Shariah?compliant instruments, including Mudaraba and Musharaka, spanning interbank and non?bank financial segments.
According to figures released on Friday by the State Bank of Pakistan (SBP), the largest contribution came from transactions between banks, non?banks and among non?bank financial institutions, totalling Rs72.4 billion. These deals were executed through Mudaraba and Musharaka structures across one?week, two?week and one?month tenors. The weighted average expected returns ranged from 11.25% to 11.30%, reflecting short?term liquidity deployment by institutional investors and banks.
Activity between conventional banks and Islamic banks, including Islamic banking branches of conventional banks, stood at Rs31.9 billion. The transactions were conducted under Mudaraba and Musharaka for one?week and three?month maturities. The weighted average expected return ranged between 11.50% and 11.75%, indicating relatively stable pricing across interbank Islamic liquidity operations. Three?month Musharaka transactions were recorded at a weighted average expected return of 9.35%.
Within the Islamic banking segment, transactions between Islamic banks and Islamic banking branches of conventional banks amounted to Rs38.4 billion. These placements were executed through one?week Musharaka contracts at a weighted average expected return of 11.50%, highlighting active short?tenor liquidity management within the Islamic banking network.
According to the SBP data, no transactions were recorded between Islamic banks and Islamic branches of conventional banks with conventional banks during the reporting period. The overall realised amount matched the reported market volume of Rs142.6 billion, indicating complete alignment between placed and settled funds.
The market activity was conducted through two primary Islamic financial instruments: Mudaraba and Musharaka. Mudaraba transactions were primarily concentrated in the non?bank segment, while Musharaka remained the dominant structure across interbank and Islamic banking channel placements.
Tenor distribution showed variation across segments. Non?bank transactions spread across overnight to one?month maturities, while interbank placements extended up to three months. Islamic banking?to?Islamic banking branch transactions were concentrated in the one?week tenor, reflecting short?term liquidity balancing needs.
Non?bank participants included development finance institutions, corporates, mutual funds, insurance companies and microfinance banks, underscoring broad?based institutional participation in Shariah?compliant liquidity operations.
“This data shows the activities in the Islamic interbank market where Islamic banks, due to non?availability of short?term Sukuk and alternatives to conventional T?bills, place their liquidity under Islamic modes of Musharakah, Mudarabah and Bai Muajjal with different banks, especially including Islamic windows of conventional banks,” IBA Centre for Excellence in Islamic Finance (IBA CEIF) Founding Director Ahmed Ali Siddiqui told The Express Tribune.
“This data also reflects the placement of conventional banks with Islamic banks under Shariah?compliant modes. Normally this option is used by Islamic banks as an alternative to the Islamic financing window or Islamic OMO of the SBP,” said Siddiqui, who also heads the Shariah Compliance Department at Meezan Bank.
“This can be considered a healthy sign where Islamic banks are dealing among themselves in the Islamic interbank market and also dealing with other banks under Shariah?compliant modes. This is also important because the Islamic money market is evolving and significant volumes are being witnessed in the context of the coming deadline of December 31, 2027, set by the constitution for the conversion of all banks to Islamic and the elimination of interest from the economy,” he added.
Industry estimate
According to industry estimates, Islamic banking in Pakistan is projected to continue its strong growth trajectory, with total industry assets expected to reach Rs18.0?19.0 trillion by December 2026, compared to Rs14.47 trillion in December 2025.
Islamic banking deposits are forecast to rise to Rs13.5?14.5 trillion, up from Rs11.04 trillion in 2025. The Islamic financing portfolio is expected to expand to Rs7.0?7.8 trillion, compared to Rs5.65 trillion in 2025, supported by growing demand in corporate, SME, agriculture and consumer financing.
Islamic banking’s share in total banking assets is projected to increase to 25?27% by December 2026, while its share in total banking deposits is expected to rise to 30?32%, compared to 27.8% in 2025. The branch network is also expected to expand to around 7,300?7,800 branches, up from over 6,700 branches.
Islamic money market transactions play a critical role in enabling banks to manage short?term liquidity requirements without relying on interest?based instruments. Mudaraba and Musharaka products have increasingly emerged as key tools for maintaining liquidity positions amid the rapid expansion of Islamic banking in the country.
