Federal Minister for Finance and Revenue Ishaq Dar announced on Wednesday that a special wing will be established in the State Bank of Pakistan (SBP) to promote interest-free banking. This wing will make recommendations, propose reforms and formulate a framework to swiftly transition from a conventional interest-based economy to an Islamic riba-free economy.
The comments came in light of the Federal Shariat Court’s (FSC) decision that ruled that Pakistan should implement a riba-free banking system and transform the economy by the end of 2027.
Addressing a seminar on interest-free economy jointly organised by the Federation of Pakistan Chamber of Commerce and Industries (FPCCI) and Centre for Islamic Economics, Jamia Darul Uloom Karachi, the finance minister stated that the two most important institutions to make the transformation possible are SBP and Securities & Exchange Commission of Pakistan (SECP).
“These institutions regulate the banking system and corporate sector – the finance ministry will extend its full support to these institutions.”
He also advised Islamic banks to make their services competitive enough to compete with conventional banking services.
The event drew a large number of stakeholders from the government, political parties, Islamic finance institutions, business community and banking industry and Islamic scholars.
SBP Governor Jameel Ahmed said, “The share of Islamic banking in the banking industry is significant. The assets of Islamic banking currently stand at 20% and deposits at 21%. The growth rates of both assets and deposits have outpaced commercial banking in recent years.”
Speaking to The Express Tribune, Employers Federation of Pakistan (EFP) President Ismail Suttar said, “Everything is achievable if there is a will to do it. It is very easy to convert to riba-free banking if we understand its actual meaning from the Quran.”
Renowned scholar of Islamic Finance and the Head of Centre for Islamic Economics, Jamia Darul Uloom Karachi, Mufti Taqi Usmani presided over the seminar and demanded that, “In accordance with its responsibility, the government should ask commercial banks to withdraw their appeals against the FSC decision and pave the way for the speedy implementation its ruling.” “The religious institutions will not allow any delaying tactics to upset the implementation of the aforementioned ruling,” he said, pressing the government to form an oversight committee to monitor the implementation status and provide guidance to governmental institutions.
Jamiat Ulema-e-Islam F (JUI-F) leader Maulana Fazalur Rehman appreciated the government for coming to this decision and taking back appeals made by the central bank and National Bank of Pakistan (NBP). He lauded the finance minister for promoting an interest-free economy, successfully managing to get Pakistan off the FATF grey list and saving the country from default.
Union of Small and Medium Enterprises (UNISAME) President Zulfikar Thaver told The Express Tribune that, “The transition has to be smooth and gradual, not abrupt. We have always advocated for Islamic banking, especially for the SMEs sector as it is asset based.”
Dar-SBP governor meeting
Separately, Finance Minister Ishaq Dar in a meeting with the SBP Governor Jameel Ahmad at Governor House Karachi said that foreign currency inflows from multilateral and bilateral creditors are in the pipeline and their planned receipts will further stabilise the country’s foreign exchange reserves.
Dar also said that acquiring the $500 million loan from the Asian Infrastructure Investment Banks (AIIB) this week also helped stabilise the domestic currency. He hoped that the other measures being taken would also help soothe the economy.
The SBP governor assured the finance minister that the central bank will take all the possible measures to stabilise the economy.
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