FSC gives government five years to implement interest-free banking system

ISLAMABAD: The Federal Shariah Court (FSC) on Thursday gave the government five years to establish an Islamic and interest-free banking system in the country because the economic system of an Islamic country like Pakistan should be interest-free.

Judge Dr Syed Muhammad Anwar read out the verdict which was reserved by a three member bench of the Federal Shariah Court. The court reserved its verdict on April 12 after hearing from all parties and the attorney general, Geo News reported.

The verdict said the abolition of riba is fundamental to an Islamic system, adding that any transaction involving riba is wrong. “The abolition of riba and its prevention are in accordance with Islam. Interest taken in any case, including debt, falls into riba. Riba is completely forbidden in Islam,” the Federal Sharia Court said.

The Sharia court verdict also said that interest granted on external and internal loans by the government also falls under riba. “The government should ensure that internal and external loans and transactions are interest free. Transactions with international institutions, including the IMF and the World Bank, should also be interest-free,” the court said.

The court said that Islamic banking and an interest-free banking system are two different things. “Pakistan already has an interest-free banking system in some places, but riba should disappear in Pakistan. The economic system of an Islamic country like Pakistan should be irrelevant,” the verdict said.

The verdict said that China, in accordance with Islamic Sharia, is moving towards an interest-free banking system. He also ordered the government to immediately remove the word interest from all banking and other laws.

The verdict also said that the Attorney General had informed them that it would take time to get rid of the interest-based system in the country. In 2001, the Supreme Court Shariah Appeal Tribunal ordered the implementation of the interest system abolition order. The court, giving the government five years to set up an interest-free banking system in the country, ordered that such a system be in place in the country by December 31, 2027.

The court said that if Section 38-F had been implemented years ago, riba would have ended. He added that the State Bank of Pakistan, in its report, said that 20% of banking operations had switched to the Islamic system. He added that five years is enough to ensure the establishment of an Islamic and interest-free banking system in the country.

“The government should present an annual report on the system without interest to Parliament,” the verdict read. The court also declared the Interest Act 1839 and all laws and provisions facilitating interest unlawful.

While welcoming the FSC verdict in the Riba case, Finance Minister Miftah Ismail tweeted: “We welcome the Federal Sharia Court (FSC) ruling in the Riba case. The government and SBP will carefully consider this important decision and then seek advice and clarification from FSC on the process, steps and timeline for implementing this decision. »

Meanwhile, Jamaat-e-Islami (JI) Ameer Sirajul Haq, while welcoming the Federal Shariah Court (FSC) ruling against riba (interest), called on the government not to wait five years and to terminate the interest-based system as soon as possible.

Speaking to reporters here on Thursday, he called on the government to convert the interest-based system into the Islamic Sharia system. Sirajul Haq said he hoped the current government would not delay the matter like the previous government under different pretexts. He said that if we felt that the government was creating obstacles to the implementation of the decision, then the government would be held accountable. He said the nation should thank Allah Almighty after Jumaa prayers for this decision as the decision against the interest based system was a great success.

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