ABHI Microfinance Bank has received in-principal approval from the State Bank of Pakistan (SBP) to establish an Islamic Banking Division, marking a planned expansion into Shariah-compliant financial services. The microfinance bank announced the development through a LinkedIn update, stating that the proposed division will offer financial solutions designed in accordance with Shariah principles. The approval provides the basis for ABHI Microfinance Bank to move forward with establishing its Islamic banking operations, subject to the applicable regulatory requirements and subsequent steps. The development comes as Islamic finance continues to form an important part of Pakistan’s banking and financial services sector, with microfinance banks also increasingly participating in the expansion of Shariah-compliant offerings. SBP’s current regulatory framework specifically includes microfinance banks with Islamic operations and provides instructions covering Islamic Banking Windows and the provision of Shariah-compliant products and services.
ABHI Microfinance Bank said the planned Islamic Banking Division is intended to expand access to Shariah-compliant financial solutions and provide customers with additional options for managing their financial needs. The move could allow the institution to develop products and services aligned with Islamic finance principles while continuing its focus on the microfinance segment. ABHI is listed by SBP among Pakistan’s regulated microfinance banks, with its regulatory profile covering microfinance banking and branchless banking. The bank’s announcement describes the approval as a new chapter in its operations, although the in-principal approval itself should be distinguished from the completion of Islamic banking operations. Under SBP’s regulatory approach, institutions moving toward Islamic banking operations are required to meet applicable conditions and requirements before fully commencing such activities. This means the latest approval represents an important regulatory step rather than the immediate launch of a complete Islamic banking product portfolio.
The development also comes amid broader regulatory activity around Islamic finance in Pakistan. During 2026, SBP issued updated instructions concerning Islamic Banking Windows, including provisions allowing microfinance banks with Islamic operations to offer Shariah-compliant products and services through such arrangements. The central bank has also introduced measures to facilitate the conversion of conventional branches into Islamic banking branches and made changes to relevant regulatory instructions concerning Islamic banking operations. SBP’s Financial Stability Review for 2025 noted growing interest among financial institutions in initiating Islamic operations, including among microfinance banks. The report stated that SBP had granted in-principal approvals to several institutions to initiate Islamic banking operations, reflecting continued activity in the sector. Against this regulatory backdrop, ABHI’s approval places the institution among microfinance-sector players pursuing a greater role in Shariah-compliant financial services.
For ABHI Microfinance Bank, establishing an Islamic Banking Division could create opportunities to develop financing and deposit-related products for customers who prefer or require Shariah-compliant financial services. The expansion may also support the institution’s broader objective of reaching customers through financial products structured around Islamic finance principles. However, the specific products, delivery channels, operational structure and launch timeline for the division have not been detailed in the announcement. ABHI said it is looking forward to the opportunities associated with the new division as it works toward expanding access to Shariah-compliant financial solutions. The development highlights the continued intersection of microfinance and Islamic banking in Pakistan, where regulatory frameworks are being adapted to facilitate Shariah-compliant services across different types of financial institutions. For customers, the eventual launch of ABHI’s Islamic Banking Division could provide another institutional channel for accessing such services, while for the wider financial sector it represents another step in the expansion of Islamic finance within Pakistan’s regulated microfinance industry.
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