A much-awaited decision on outlawing interest-based banking is now public. The Federal Shariat Court has declared interest (Riba) as un-Islamic, and directed the government to amend and frame laws by December 2027, accordingly. It, however, said that loans that have been procured till date shall continue to be regulated as they are, but new financial transactions henceforth will be under an interest-free system. This was such a simple proposition under the canons of Islamic laws, but it took the honourable court almost three decades to formulate an opinion. This indicates the inherent impediments that come into play on the part of bureaucracy, as well as by status quo forces who do not want to see the modus operandi disturbed. Even if public interest is there in the proposed change, forces of inertia act as a spanner in the works.
While the first petition for the abolition of Riba was filed in 1990, and a firm decision was reached in 1999 against interest-based banking, the same was put in quandary for reasons of decorum. A debate was stirred as if Pakistan will be an outcast if interest on finance is ruled out, and shall be cut off from the international money markets. But the matter of fact was that parallel Islamic banking thrived not only in Pakistan but also across the Middle East. The reasons behind the delay were multifaceted, and prime among them is the lack of interest shown by successive governments to literally make headway in reorienting the financial system at work. Inordinate delays in the cumbersome judicial process as well as resistance from bureaucracy were other factors that lingered on for years to pronounce an obvious truth under Sharia-compliant financial injunctions.
Now comes the gigantic task to overhaul the prevailing rusted system. The court is categorical in its judgment, saying all internal and external loans should be interest-free, and opined that it would be ‘more beneficial’ for the economy. The FSC went on to state that every loan which extracts any additional amount upon the principal from the debtor is illegal. Pakistan is in need of a resolute financial order and one that is humane, and doesn’t come to fleece businesses. An interest-free economic module will certainly usher in more entrepreneurship and growth.
Published in The Express Tribune, April 29th, 2022.
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