Finance Minister Ishaq Dar says that the State Bank of Pakistan and the National Bank of Pakistan will withdraw their appeals against the Federal Shariat Court’s ruling against interest payments. He said that the government will now be pushing towards creating an interest-free system in the Islamic Republic of Pakistan. The riba-free system will allow for a better system to form in the country as per the teachings of the Holy Quran. Dar said that during his earlier tenure as finance minister, the government was working towards establishing the riba-free system and it was successful in doing so. However, the process was halted for the years in between, and now it will be established without further ado.
The Federal Sharia Court announced earlier this year that enough time had passed since its first judgment against conventional banking in 1991. Back then, the system had to be replaced in 1992. However, due to political and geopolitical changes, the process never began. Now it is of utmost importance that the Islamic Republic let go of conventional banking and introduce the system of Islamic banking universally.
Islamic banking has seen many success stories around the world. Many Middle Eastern and East Asian Muslim countries follow this system, and it has done them good. Pakistan already houses many Islamic banks. There are some banks that are purely Islamic, while others have separate systems established for Islamic banking. Therefore, the shift in the system may not be as difficult as some might say because the basic structure has already been laid out.
This new system is also beneficial in quite a lot of ways. It guarantees financial inclusion. This implies that both individuals and businesses have access to cost-effective and practical financial services and products to meet their needs. It provides transactions, payments, credit, insurance, and savings in a sustainable and responsible manner. It should be noted that Islamic banking still ensures financial inclusion that encourages savings in the large pool both in the global and local economies, even though receiving and paying interest (riba) is prohibited by Islamic law,
The effects of harmful products and practices are lessened by Islamic banking. Transactions that support practices and industries that Islam’s teachings forbid are not permitted under Sharia law. Islamic banking upholds the principle of equitable sharing of all risks, including profits and losses. Therefore, the law ensures that Islamic financial products comply with Sharia, which ensures that gains, losses, and threats are fairly distributed. The situation is different from the western financial system, which seeks to make money by charging interest on the principal amount it lends customers. In this type of banking, it is the customers who are liable for the risk.
Economic growth is accelerated by Islamic banking as well. It’s important to note that Islamic financial institutions strive to expand while also turning a profit. Therefore, the decision to invest in a particular business will depend on its success and potential for growth.
This new change is likely to be beneficial for Pakistanis as it adheres to the religion of the larger part of the population. However, Pakistan will have to learn how to deal with institutions outside of the country that is not riba-free institutions.
