Federal Shariat Court declares interest-based banking as against Sharia

The Federal Shariat Court (FSC) of Pakistan ruled on Thursday that elimination of interest from the economic system was a religious and legal responsibility, ordering the government to end the interest-based banking system by the end of 2027.

The decision was made on petitions against Riba (usury) after the Supreme Court referred the case back to the court in 2002 following appeals against the decision of the FSC.

While announcing the verdict in a long-pending case, Judge Syed Muhammad Anwar emphasised that interest-free banking can be implemented all over the world. He did not agree with the federal government’s arguments highlighting the negative impacts of interest-free banking system.

He directed the government of Pakistan to make efforts to eliminate interest from the country’s banking system in the next five years.

Anwar further called for getting rid of interest in domestic and international transactions. “All regulations containing the word interest should be revisited because such laws are against Shariah,” he said.

The court also ordered conversion of the existing banking system to an interest-free system by December 2027.

The case was decided by a three-person bench after 19 years and 34 hearings. The court had earlier reserved the verdict of the case on April 12, 2022.

It is pertinent to mention that the Riba free economy case was remanded by Shariat Appellate Bench of the Supreme Court of Pakistan in 2002.