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KARACHI: Federal Minister for Finance and Revenue, Miftah Ismail Tuesday said the 5-year timeframe granted by the Federal Shariat Court (FSC) for conversion of the current mix between Islamic and interest-based conventional banking into a full-fledged Riba-free Islamic banking system is too ‘ambitious’ and perhaps requires a little longer to achieve the target.

However, he vowed that Pakistan will go for the implementation of Riba free banking system, incompliance with the FSC rulings.

Addressing the concluding session of the 3rd World Islamic Finance Forum-2022 (WIFF) as the chief guest via zoom, Miftah said the FSC order is a step in the right direction, and “there is nothing to fear for Pakistani investors as the Court has taken very enlighten view in its ruling.” It would be an evolutionary process of conversion of conventional banking into a Riba-free Shariah compliant banking.

Islamic finance allows Muslims around the globe to participate in banking, and purchase of government auction papers etc. Many Muslims do not buy insurance because of religious reasons; however, Takaful has offered them an alternate.

Conference on Islamic financing: Call for replacing interest-based banking with Shariah-compliant system

Riba-free banking will attract a number of Muslims who otherwise do not engage in banking system. By doing just conventional banking, we actually ignore a bunch of Muslim population around the world including Pakistan and thereby compromising our prosperity. It’s very important to cater the financial needs of these Muslims who do not wish to have anything to do with conventional interest-based banking. For us to have an inclusive growth, we have to allow unbanked to do interest-free banking.

“I confess, I really do not know enough about Islamic finance and economics to talk very reasonably,” the finance minister said and added that a number of wonderful people in Pakistan really know the Islamic Shariah knowledge of finance and banking who guide Pakistan’s efforts towards the Islamic banking.

He acknowledged that many institutions including IBA are working hard to produce good gradates and experts of economics and finance, and many banks have done very well by employing these graduates. He also acknowledged the role of some seminaries including Darul Uloom for producing graduates and Muftis who have good knowledge of Islamic financial system.

Themed ‘Development of Islamic finance ecosystem for global prosperity’ the 2-day mega event was organized by Institute of Business Administration, Center for Excellence in Islamic Finance (IBA, CEIF) here at a local hotel. Acting Governor SBP Murtaza Syed in his virtual address said Islamic finance is widely recognized as fastest growing segments of global finance.

The Islamic economic system focuses on providing decent, and provides prosperous lives to all human beings and ensuring everyone has a minimum level of welfare. The major characteristics of Islamic finance are aligned with sustainable development and prosperity. “Without any doubt the Islamic finance is the industry’s future, it’s dependent upon your ability to keep pace with the latest global developments and align its strategies accordingly,” Murtaza said.

Government asked to end riba-based banking system by 2027

He said one of the themes in this year conference was Islamic financial technology (Fintech) which is in line with the State Bank’s vision of digitalization and financial inclusion. Fintech is a new revolution in finance industry, and technological sophistication of financial institutions has become increasingly important as strategic way forward.

According to a global Islamic Fintech report 2021, he said the Islamic Fintech market size for OIC countries stands at $49 billion in transaction value, but today this only represents 0.7 percent of the global figure. It is projected to grow at 21 percent to $128 billion by 2025.

With roughly more than 1500 Islamic financial institutions are operating around the world, the prospects of Islamic Fintech look very promising. Fintch can play an important role in promoting Shariah Complaint products and services by ensuring rapid processes.

Copyright Business Recorder, 2022

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