The most consequential trend in Pakistani banking is not a product or a rate. It is conventional banks deciding, one by one, to stop being conventional. Faysal Bank proved a large listed bank could convert its entire balance sheet. The Bank of Khyber and U Microfinance Bank are in the middle of their own transitions, and Bank Makramah is attempting one under financial duress. For depositors, a conversion can mean better products, or years of dual books and uncertainty. Here is the research-backed state of the wave in 2026, bank by bank.
Ready to compare halal options?
Faysal Bank: the completed proof
Faysal, incorporated in 1994 and majority-owned by Bahrain's Ithmaar and DMI group interests, transformed from a conventional interest-based bank into a full-fledged Islamic bank, a process the bank says was independently validated by the International Islamic Rating Agency as the world's largest Islamic banking transformation to date. It now describes itself as Pakistan's second-largest full-fledged Islamic bank, with a four-scholar Shariah board chaired by Mufti Mohib ul Haq Siddiqui, who had been with Faysal's Islamic operation since 2011, well before the conversion completed. The takeaway from Faysal is that conversion at scale is achievable, and that the banks that do it well build the Shariah infrastructure years ahead of the finish line. One honest footnote: the bank's own site simultaneously claims 900+ Islamic branches in 360+ cities and 700 branches in 270 cities, so treat its scale claims with the usual care.
Bank of Khyber: a provincial bank goes all-in
BOK, owned by the Khyber Pakhtunkhwa government, has run Islamic banking since 2003, among the earliest windows in the country, and by 2019 roughly half its branches (84 of 169) were already Islamic. On February 20, 2025, it notified the Pakistan Stock Exchange that it had initiated full conversion from conventional to Islamic bank, and it publishes running lists of branches converted during 2025. Its governance was already unusually complete for a window: published IRR and PER policies, profit distribution policy, fatwa page and weightages. For depositors this is the low-drama conversion: an institution finishing a journey it started two decades ago, with the KP government behind it.
U Microfinance Bank: conversion with fresh capital
U Bank, the PTCL/e& subsidiary with 300+ branches, piloted Islamic banking in 2022 with five branches, took an SBP licence for nationwide Islamic services that November, and in 2025 began converting the whole bank, backed by PKR 4 billion in fresh capital from the PTCL group earmarked for the Islamic transition and digital build-out. Its products are microfinance-flavoured: Apna Karobar Murabaha financing from Rs 40,000 to Rs 600,000 and the Samar Islami term deposit from Rs 5,000. Two caveats from our research: the bank's website is inaccessible from outside Pakistan, so verification relies on cached pages and press coverage, and its Shariah supervision is a single dedicated advisor rather than a full board, with no published fatwas we could open. A genuine conversion, with thinner public governance than the big banks.
Bank Makramah: the cautionary tale
Bank Makramah, the renamed Summit Bank, is converting to Islamic banking while climbing out of a financial hole. Its September 2025 quarterly accounts disclosed accumulated losses of Rs 51.6 billion, negative equity of Rs 13.14 billion and explicit going-concern doubt. The bank then announced compliance with minimum capital requirements via a court-sanctioned amalgamation with Global Haly Development and cumulative sponsor injections of Rs 41 billion from H.E. Nasser Abdulla Hussain Lootah, claiming a capital adequacy ratio of 11.65%. Meanwhile the conversion itself is visibly incomplete: the bank publishes both Islamic and conventional schedules of charges, its June 2026 rate sheet shows Islamic savings around 8.14% beside legacy conventional accounts at 0.11-0.25%, and it offers no consumer financing products at all. Its Shariah board is genuinely strong on paper, including Mufti Irshad Ahmad Aijaz, who chairs the SBP and SECP Shariah boards. But a strong board cannot fix a balance sheet. The lesson: 'converting to Islamic' is sometimes a strategy for a fresh start, and depositors should read the accounts, not the rebrand.
What a conversion means for you as a depositor
During a conversion, expect dual books: Islamic and conventional products running side by side for years, with your branch converting on a schedule the bank publishes (BOK's approach) or does not. Your existing conventional deposits do not become halal automatically; you generally need to move into the Islamic products as they launch, and the profit you earned before the switch keeps its original character. Practical checks: whether the bank publishes a conversion branch list, whether Islamic declared rates and weightages are already being published monthly, and whether the Shariah board predates the marketing push. Track how the converting banks' deposit products stack up against the established Islamic banks on HalalWallet's bank accounts page.
Frequently asked questions
Which Pakistani banks have fully converted to Islamic banking?
Faysal Bank is the landmark completed conversion, now Pakistan's second-largest full-fledged Islamic bank. Meezan itself began via conversion of an investment bank into Pakistan's first Islamic commercial bank. Among current transitions, Bank of Khyber initiated full conversion in February 2025 and U Microfinance Bank began a bank-wide conversion in 2025.
Is my money safe in a converting bank?
Conversion itself does not endanger deposits; the risk lives in the specific institution's finances. BOK converts from a position of provincial-government ownership and long Islamic experience. Bank Makramah converts while repairing negative equity disclosed in its 2025 accounts. Same label, very different risk profiles: read the latest financials.
Do my old conventional deposits become halal when the bank converts?
No. Interest accrued under conventional contracts remains interest; scholars generally advise purifying it by giving it to charity. As your branch converts, move balances into the Islamic deposit products (Qard current accounts, Mudarabah savings) so future returns come from certified pools.
Why are Pakistani banks converting at all?
Demand and direction. Depositors keep choosing Islamic products where offered (two-thirds of Naya Pakistan Certificate money sits in the Islamic version), Islamic windows have grown into the largest parts of several banks, and Pakistan's policy environment favours the shift. Faysal's completed conversion also proved the commercial case to every board in Karachi.
Compare providers in your state
See side-by-side comparisons of Shariah-compliant products, or let our matcher recommend the best options for your situation.
How can I check my bank's conversion progress?
Look for stock-exchange notices (BOK's February 2025 PSX filing is the model), published lists of converted branches, and whether the bank still maintains a conventional schedule of charges. A converting bank that publishes its progress is managing the transition; one that only rebrands its logo is marketing it.