The government has asked to end the riba-based banking system by 2027

ISLAMABAD: The Federal Court of the Shariat (FSC) has declared that the prohibition of Riba is complete and absolute in all its forms and manifestations according to the injunctions of Islam; therefore asked the government to implement its decision by December 31, 2027.

The FSC Plenary Panel, comprising Chief Justice Muhammad Noor Meskanzai, Justice Dr Syed Muhammad Anwer and Justice Khadim Hussain M Shaikh, announced on Thursday, in the exercise of power under Section 203-D of the Constitution, judgment reserved.

The Riba case was referred by the Shariat Court of Appeal of the Supreme Court of Pakistan in 2002. The existing bench of the FSC held 34 hearings, during which the claimants, their counsel, jurisconsults, amicus curiae, economists, experts , academics, chartered accountants, attorney general of Pakistan and the attorneys general of the provinces put forward their arguments.

The judgment stated that a period of five years is reasonably sufficient for the full implementation of its ruling, i.e. to convert Pakistan’s economy to an equitable, asset-based, resource-sharing economy. risk and interest-free. Therefore, he said by December 31, 2027, the decision will take effect through the complete elimination of Riba from Pakistan.

The FSC reserves its verdict in the case of the economy without Riba

The federal and provincial governments are required to complete the necessary legislative changes in the disputed laws in order to bring these laws or provisions of the laws into conformity with the injunctions of Islam by December 31, 2022.

He said all of these laws would come into force prospectively.

The rapid proliferation and exponential growth of interest-free banking not only in Pakistan but throughout the Islamic world and even the world is a reality that has established that interest-free banking is not only practicable but also feasible. He disagreed with the federal government’s fears that the introduction of interest-free banking into Pakistan’s economic system could have a negative impact on Pakistan’s overall economic system.

The judgment noted that the legal and statutory framework supported by the State Bank of Pakistan (SBP) to adopt interest free banking in Pakistan is already available, under which the existence of Article 25(2) ( b) banking companies The 1962 Ordinance and Section 22 of the State Bank of Pakistan Act 1956 pave the way for the complete elimination of Riba from the economy.

“One of the fundamental goals of an Islamic state like Pakistan is to have a fair economic system free from exploitation and speculation.” “The Islamic economic system is an equitable, asset-based and risk-sharing economic system. It promotes and encourages the circulation of money in a society. This severely discourages the accumulation of wealth in a few hands.

The Islamic economic and financial system is based on real economic activities which prohibit Riba, al-Gharar (uncertainty), al-Qimar (gambling) and al-Maysir (unearned income) in accordance with the injunctions of the Quran and the Sunnah of the Holy Prophet (SAW) . The prohibition of Riba is the cornerstone of the Islamic economic system. “Therefore, we have decided that every loan which extracts an additional amount on the debtor’s principal is Riba, therefore, any transaction which contains Riba, even at a lesser level, falls under the category of Riba thus prohibited,” said the jugement.

She argued that all predominant forms of interest, either in banking transactions or in private transactions, fall within Riba’s definition. Therefore, he declared that the prohibition of Riba is complete and absolute in all its forms and manifestations as per the injunctions of Islam in accordance with the Holy Quran and the Sunnah. Charging any amount in any way against the principal amount of a loan or debt is Riba, which is totally forbidden according to the Quran and the Sunnah of the Holy Prophet (SAW), said the judgement.

It therefore decided that: i. Bank interest in all its forms is Riba, thus the complete and absolute prohibition of interest does not change: a) with the change in the purpose of the loan, whether the loan is taken for commercial, productive or industrial, etc. or is taken for personal needs; or with any change in the percentage at which interest is charged on a loan, whether low or high; and with any change in the method of calculating the amount of interest on a loan, whether calculated as simple interest or as double or multiplied interest on a loan.

ii. Any money transaction for money of the same denomination and value where the quantity on both sides is not equal, whether in a cash transaction or in a transaction based on deferred payment is Riba.

A barter transaction between two weighable or measurable goods of the same kind, where the quantity of both sides is not equal, or where the delivery of one side is deferred is Riba. A barter transaction between two different weighable or measurable commodities where delivery on one side is deferred is Riba. Any change in the status of the borrower or lender does not affect Riba’s absolute ban. The Riba remains absolutely forbidden, whatever the name it bears.

The Court held that any stipulated interest in government borrowings acquired from domestic or foreign sources is Riba and clearly prohibited by the Holy Quran and Sunnah; hence, in the future, the government is urged to adopt Sharia-compliant modes while borrowing from domestic or foreign sources.

The judgment referred to the constructive, encouraging and positive approach of international financial institutions like the IMF, the Asian Development Bank and the World Bank to use the Sharia-compliant Riba free modes of financing to make their modes of financing more productive and economically feasible.

He said that the People’s Republic of China is also willing to use Islamic financing mode for CPEC projects, needless to mention we are already using Riba-Free Shariah-Conformed financing mode while dealing with Islamic Bank of development and with some of the Islamic countries.

The judgment stated that all such laws or provisions of laws, which are challenged before the Court, which contain the word “interest” in the sense of bank interest is Riba, therefore prohibited and any payment of an additional amount in addition to the payment due to a delay, which is considered and calculated as interest on this amount also falls into the category of Riba, therefore forbidden to be contrary to the injunctions of Islam according to the principles laid down in the Quran and the Sunnah.

Copyright Business Recorder, 2022

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