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Saturday, 1 November 2008

Why not Islamic banking?

The whole world is experiencing the worst kind of financial recession in living memory and despite pumping in billions of dollars it has not been able to restore confidence of investors, or bring the economic activities back to normal. The $700 billion bailout plan by the US, followed by a series of massive packages by the European Union, Japan, the Arab states, and within their means by India and Pakistan, too, have done little to turn the tide of the economic meltdown, leaving tens of thousands across the globe jobless and ruining businesses worth trillion of dollars, not to mention losses of an equal magnitude at the top bourses which have since fallen flat.

The economists around the world are embroiled in long discussions primarily focusing on various aspects of the economic system based on capitalism. The key element of the system – the interest on money advanced and borrowed – has been featuring in almost all these discussions at the world fora.

In our part of the world the debate is whether it is the mischief of the interest-based economy, or of some other factors, which have jolted the whole fiscal matters as liquidity has almost disappeared at the financial institutions, and people are worried about their deposits in the banks. New projects are not seeing light of the day, and the ongoing schemes moving at a snail’s pace. Markets are dull; inflation is high as the economic gloom badly shrouds life. Is there a way out from such an unprecedented misery, is a question creeping in the mind of everyone who has been hit so adversely by this economic tsunami.

This question, and the situation, would not have occurred had we been able to confront mafias in the realm of capitalism about a decade ago when the Federal Shariat Court, after a long hearing, gave a decision in favour of interest-free banking in November 1991, declaring the so-called ‘mark-up’ on saving accounts by the banks as repugnant to Islamic injunctions. This could have introduced an entirely a new system of financing, mainly helping the poor and the ordinary by denying accumulation of wealth in a few chosen hands. As was expected, the decision was challenged by the government, as the capitalists’ lobby supposedly forced it to do so, in the Shariat Appellate Bench (SAB) of the Supreme Court. Again, an effort was made to entwine the matter in long legal procedures. But the SAB, in its landmark judgment on December 23, 1999, rejected the government appeals and ordered it to remove all laws involving the interest before June 30, 2001. It also asked the government to set up a Commission for Transformation of Financial System (CTFS) and two task forces to plan and implement the process of the transformation. One year relief, however, was granted to the government on its request, to implement the SAB verdict.

The capitalist-mafia, in the meanwhile, continued its intrigue. The Islamic banking efforts received a serious blow when on June 21, 2002, on a review petition by UBL, the Supreme Court’s SAB set aside all the previous judgments in this regard, including its own December 1999 decision, asking the FSC to re-hear the original case once more! Since then, the case has been lying buried in the files.

Since the capitalist mafia has been able to frustrate efforts for an alternate Islamic banking in Pakistan, the national economy is plummeting with other economies based on capitalism. Had there been a complete riba-free Islamic banking in practice at this crucial stage, Pakistan, by all reckoning, would have been standing steadfast economically, but also acting as a torch-bearer for the world sinking under the burden of failed capitalism.

(The Post)

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