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EditorialInterest-free banking: reality and claims

Interest-free banking: reality and claims

According to Ishaq Dar, the federal finance minister, it is feasible to get rid of interest in the country in five years. Given the Islamic banking sector’s current market capitalization of Rs 7 trillion, the announcement appears to be optimistic. Every other form of government in Pakistan and the world makes the promise that it will free the economy from the grip of the interest-based vortex by implementing an Islamic banking system. It seems out of place for the finance minister to say that Islamic banking products will need to be cheaper at a time when the economy is experiencing a deficit. Even though Pakistan has never defaulted before and won’t do so now, the economy hasn’t done well after the withdrawal of interest-related appeals. The income divide in Pakistan is getting wider. Currently, those who earn less than Rs 10,000 per day but more than Rs 5,000 per day fall into the lower middle class, while those who earn less than this fall into the impoverished class, with 80% of people lacking either empowerment or assets. Individuals earning between Rs 10,000 and Rs 50,000 per day are considered middle class, whereas those earning between Rs 50,000 and Rs 500,000 per day are considered upper middle class. Ironically, only 4% of Pakistan’s population is considered upper class, but they control 96% of the nation’s property and all of its political, judicial, and administrative authority. Let’s avoid talking about the one per cent, who are extremely wealthy and affiliated with the deep state.

The income statistics demonstrate that there are issues with the financial and economic institutions. Instead of developing extremely progressive economic policies, the administration demonstrated a rush to implement the Federal Shariat Court’s ruling regarding Pakistan’s interest-free banking system. The road is not simple. The Supreme Court should hear these petitions on a priority basis and issue its ruling on them as soon as possible even though two state-owned banks, the State Bank of Pakistan and the National Bank of Pakistan, withdrew the government’s petitions. However, other banks and numerous individuals also filed petitions challenging the Shariat Court’s ruling.

Although the constitution expressly states that no law can be passed in a nation that conflicts with the Islamic Shari’ah, every administration too far has chosen to ignore the demand for an interest-free banking system. Unfortunately, Pakistan’s lawmakers have disregarded this crucial constitutional necessity, which runs counter to both the Quran and the Sunnah. The current administration will be credited if interest-free banking is implemented, however, there is scarcely any structure ready to start the banking process because eliminating interest from the banking system will not result in the expected results. The move will be opposed by international organizations like the World Bank and the IMF because interest rates are what drive our budgets, financial obligations, and business transactions. Because of this, we must concentrate on the broader economy in addition to the financial system. Interest must be eliminated from all instances containing interest by 2027. In this context, local academics, muftis, and economists should be consulted for advice. The nations that currently employ non-interest-bearing systems must likewise be used similarly. According to Jameel Ahmad, governor of the State Bank, the central bank has activated a high-level working group and is also exploring alternatives to Sukuk. After conducting studies and discussing numerous issues, think tanks from many nations, including the United States, provide recommendations to governments in the form of plans, proposals, and ideas. If used for the development of official initiatives and not just discussed in seminars, practical experiences, research evaluations, and recommendations can aid in producing more beneficial outcomes.

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