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Thursday, July 18, 2024

Shariat Court declares interest based banking system un-Islamic

The verdict was announced in a long-pending petition against the interest-based system. The case had been pending since 2002 when the Supreme Court had repealed the earlier verdict given by the Federal Shariat Court on the matter.

On Thursday, the Federal Shariat Court ruled that the prevailing interest-based economy and banking system is against the Islamic preaching’s and directed the government to eliminate riba and develop a system to give out loans on an interest-free basis by the end of 2027.

The verdict was announced in a long-pending petition against the interest-based system. The case had been pending since 2002 when the Supreme Court had repealed the earlier verdict given by the Federal Shariat Court on the matter. Earlier in 1991, the Federal Shariat Court passed a judgment in which it deemed riba to be un-Islamic.

The Supreme Court held up the same in 1999. However, shortly after Musharraf came into power, the decision was invalidated by the Supreme Court, and the case was referred back to the Federal Shariat Court following the appellate Court’s decision. The Shariat Court was requested to ponder on four major points name; Jurisdiction of the Shariat Court, Impediments in practical implications, various interpretations of Riba including inflation, and finally, errors in the 1999 judgment.

Read More: No plan to change constitutional status of Federal Shariat Court: Govt

The case has since been in the Federal Shariat Court. Several Chief Justices have served during this stint, but the case remained undecided until today. According to sources privy to the matter, the Court asked for opinions from all relevant stakeholders before announcing the verdict.

The bench comprising Chief Justice Muhammad Noor Meskanzai, Justice Dr. Syed Muhammad Anwar, and Justice Khadim Hussain M Shaikh had reserved its verdict on 12 April.

In its decision, announced today (Thursday), the Court observed that the “Islamic banking system is risk-free and against exploitation,”. The Court added that the prevalent banking system promoted un-Islamic practices such as usury, where the lender received interest on the loan amount.

Read More: Op-ed: Advisory Jurisdiction of Supreme Court

The Court observed that the country should strut towards having an interest-free banking system in the next five years. Responding to comments made by the government on the interest-free system, Justice Anwar noted that “I disagree with the federal government in its reply stating negative effects of interest-free banking.”

The Court’s decision was welcomed by the current Finance Minister, who tweeted that “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.”