Federal Shariat Court has ordered the government and relevant state departments to enforce the economic, financial and banking system of the country in accordance with the principles of Islamic teachings by 2027.
In the verdict, the court termed the Interest Act 1839 is totally against Sharia-teaching. The court ordered to repeal financial laws against Sharia by June this year.
Also read: Bank AL Habib declares Rs. 4.96 billion profit after tax
The court observed that 20% percent of the banking has been converted to Islamic banking in Pakistan and the migration from interest-based economy to Sharia-based is viable in the next five years.
The court remarked that Islamic financial system could have been established in Pakistan many decades before if the government and relevant department work in the direction of Article 38 F of the constitution.
Also read: SECP organizes awareness session for registered intermediaries
From June 1, all legal clauses that contain the word “interest” will be considered null and void, the shariah court said. The government should remove the word "interest" from every law, the order said.
The Full Bench of the Federal Shariat Court comprising of Justice Muhammad Noor Meskanzai Chief Justice, Justice Dr. Syed Muhammad Anwar and Mr. Justice Khadim Hussain M. Shaikh announced the judgment against Riba case which was filed 30 years before by Jamaat-e-Islami, Tanzeem-e-Islamic and other religious parties.
It is pertinent to mention that Riba Case was remanded by the Shariat Appellate Bench Supreme Court of Pakistan in 2002.
Experts View
Ahmed Ali Siddiqui, Director Centre of Excellence in Islamic Finance said the a comprehensive action plan along with unwavering commitment at the level of the government and public sector institutions could transform interest-based financial system into Islamic financial system.
Also read: HBL Q1 2022 Profit rises to Rs. 14.6 billion driven by strong business volumes
The government should not stop borrowing from conventional banking system instead it could have financing from Islamic banks and institutions not only in Pakistan but for institutions like International Monetary Fund, Asian Development Bank and World Bank, which also support the Sharia-way of financing.
The government and its department should end its financial and transactional matters with Riba-based system and continue their operations with Islamic institutions which have already designed alternate solutions, he said.
Islamic Banking Industry is consisting of 5 full-fledged Islamic banks (IBs) and 17 conventional banks having Islamic banking branches (IBBs). There are nearly 4,000 branches operating countrywide.