Federal Shariat Court directs govt to replace Riba-based financial system with an Islamic one
It has declared the Interest Act 1839 of Pakistan as un-Islamic.
The Federal Shariat Court has directed the government to replace the Riba-based financial system with an Islamic one in five years. It has declared the Interest Act 1839 of Pakistan as un-Islamic.
This decision came from a full bench of the Federal Shariat Court (FSC) supervised by Chief Justice Muhammad Noor Meskanzai, Justice Dr. Syed Muhammad Anwar, and Justice Khadim Hussain M. Shaikh. The Riba case was remanded by the Shariat Appellate Bench Supreme Court of Pakistan in 2002.
Justice Syed Muhammad Anwar announced the verdict, saying that a banking system that is interest-free is completely possible in the country, as some institutions are doing it. The court ruled that the elimination of Riba is the foundation of the Islamic system, further adding that interest taken on any kind of loan lies within the category of Riba, which is against the religion.
Interest payment by the government on all external and internal debts is Riba, the court directed that transactions with international institutes (like IMF and World Bank) should be interest-free. All government laws that have the word ‘interest’ should be repealed immediately as well, as the use of the word ‘interest’ is contrary to Islamic law.
Starting from 1st June, all legal clauses that have the word ‘interest’ will be null and void. The Shariah Court observed that according to the SBP’s plan, 30% of banking has been transferred to the Islamic system. The government is also expected to put forth an annual report on interest rates in Parliament.
Minister of Finance Miftah Ismail welcomed the decision of the Federal Shariah Court. He wrote that the government and SBP will study this decision and seek guidance about the process.
We welcome the Federal Shariat Court (FSC) decision in the Riba case. The government and SBP will carefully study this important decision and then seek guidance and clarification from the FSC about the process, steps and timeframe to implement this decision.
— Miftah Ismail (@MiftahIsmail) April 28, 2022
Director Centre of Excellence in Islamic Finance, Ahmed Ali Siddiqui said that a detailed plan along with commitment could help introduce an interest-free system.
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