SC verdict on Riba should be implemented in letter and spirit
ISLAMABAD: The Supreme Court’s 1999 verdict on Riba (interest) was a historic and landmark development, not only for Pakistan, but for the whole world.
While a review petition was pending since long, there seems to be little scope for any major alteration. The judgement was so sound, comprehensive and lucid in argument that it has very little room, if any, for review. It has been kept pending for almost a decade and no date has been fixed for its hearing. The verdict needs to be implemented in letter and spirit to establish a comprehensive economic system based on Islamic teachings.
These were the views expressed by different experts at a seminar on ‘Islamic Banking and Finance: SC Riba Judgement and Beyond’ organised by the Institute of Policy Studies (IPS), Islamabad, as part of a series of such events under its research programme on Islamic economics and finance.
IPS Founding Chairman Professor Khurshid Ahmad, who is internationally acclaimed as one of the pioneers and authorities in the field of Islamic finance was the keynote speaker. Others who spoke on the occasion included International Islamic University Islamabad (IIUI) Sharia Academy DG Dr Muhammad Tahir Mansuri, IPS DG Khalid Rahman, senior IPS associate Ameena Sohail, Al-Hidaya Centre for Islamic Finance’s Shariah Advisory and Structuring Head M Saarim Ghazai, and IIUI Sharia and Law lecturer Ghazala Ghalib Khan.
Commenting on the SC judgement, Professor Ahmad said that it had done the remarkable work of summarising the debate that had been intriguing the minds for four to five centuries. He said that the over 1,100-page judgement was a landmark verdict in the sense that it takes into account theoretical as well as operational aspects of the issue and has once for all settled all issues from a position of authority. On the academic front the judgement has acquired the position of a ‘reference point’ and any scholarly discussion on Islamic finance anywhere in the world was deemed incomplete without reference and recourse to it but on practical level a lot has to be done to bring a real change.
He noted that money was the instrument for exchange and for measuring the value but it has to be used for actual economic activity in the fields of industry and production that would create job opportunities and require commercial activities. The real problem with the capitalist economic model was that money has become an objective in itself and the whole economic activity was based on the principle of ‘money begets money’.
He stressed that commodity, money, commodity (CMC) model has to be adopted instead of MCM or merely MMM model in order to avoid concentration of money in few hands with others struggling for life.
Referring to the development of Islamic banking in Pakistan following this judgment, he said that it can best be explained as a first step in the right direction. One should not undermine the positive features of Islamic banking in consequence of which Islamic banks have fared well in comparison with other financial institutions even during global economic crisis but at the same time it has to be admitted that Islamic banks have to go a long way before a real change can be expected. Though, Islamic banks should rely less on products with fixed or near-fixed profit and do more to become the catalysts for real economic growth, he noted.
He stressed that in order to achieve the spirit of Islamic economics Islamic banks need to shift themselves from current trade-oriented operations to production-oriented ventures. Shariah Boards of Islamic banks should come forward to achieve the spirit of Islamic law through efficiency, equity, competitiveness, transparency and information.
He stressed that Islamic banks need to be transparent, efficient and competitive in all respects to make them the first choice. Detailed manuals for Shariah audit have been developed and have to be adopted by all Islamic banks.
Discussing the future of Islamic banking he noted that it cannot run without Islamic economics. He was of the view that not only the political will was absent in decision making circles for reforming the economy, any attempt in this direction was deliberately frustrated by them.
He opined that while the efforts to bring a change from top to bottom should continue, visible change would be brought through a bottom-up approach where grass root economic activity has to be initiated through new economic structures and ventures based on Riba-free micro-financing. He shared the experience of one such voluntary organization, which has lent over three billion rupees with a return rate of 99 percent and its model was being studied globally by leading business schools.
He also underlined the need for public education, awareness and participation of people in order to bring Islamic economics in full operation.