‘Financial system can be made Shariah-compliant by regular issuance of Sukuk’

LAHORE: The financial system of the country can be made Shariah-compliant and interest-free by regular issuance of Sukuk as a comprehensive framework for Sukuk already exists in Pakistan, said banking sector experts.

They said the Federal Shariat Court has already observed that five years period is reasonably enough time for the implementation of the Shariah compliant banking by specifying 31st December 2027 as a cut-off date for a complete elimination of Riba from Pakistan.

Federal Finance Minister Ishaq Dar has reiterated the government’s resolve to abolish the interest in the banking system and replace it with Islamic mode of banking within the next five years.

The State Bank of Pakistan is already following Shariah Standard for Audit and Accounting amidst the existence of a number of full-fledged Islamic Banks in the country in addition to many conventional banks with branched or windows of Islamic banking, which is ample evidence that the transformation for conventional banking into Riba-free or Islamic banking system can easily be achieved. This mode of banking is contributing a lot in bringing economic stability in the country according to its market share.

They said the accounting standard adopted by the SBP for this purpose are made and issued by a highly reputed international body of well recognised Islamic scholars of the world called Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The bank is also following the recommendations of Islamic Financial Services Board (IFSB), they added.

The sectoral experts have further pointed out that the word “interest” appearing in all other laws related to insurance business, money laundering, benevolent fund, saving certificates rules, negotiable instruments, land acquisition and other fields will also be deleted and amended once the banking system is made fully compliant with Shariah.

They said charging of any amount in any manner over the principal amount of a loan or debt is Riba which is prohibited in complete and absolute terms according to the injunctions of Islam.

In banking terms, they said, any transaction of money of the same denomination and value where the quantity on both sides is not equal, either in a spot transaction or in a transaction based on deferred payment is Riba.

These experts have further pointed out that any kind of socio-economic, legal or religious change in the borrower or the lender of a loan transaction involved Riba does not change the nature of prohibition. It is equally forbidden for the poor and the rich and even for the Muslims and non-Muslims in an Islamic state. Similarly, they added, a change in the purpose of taking loan, ratio of percentage, and legal status of any party involved in a Riba transaction would not change the nature of its prohibition.

Copyright Business Recorder, 2023