Current Financial System can become Sharia-compliant in 5 ysears

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Experts and practitioners of Islamic banking and finance have welcomed the decision of the Federal Sharia Court on the elimination of the Riba-based financial system from the country, hoping that the government will implement the ruling of the court in true letter and spirit.

They said the conversion is viable for the financial system from interest-based to Sharia-compliant in the next five years. Ahmed Ali Siddiqui, Director Centre of Excellence in Islamic Finance said that a comprehensive action plan along with unwavering commitment at the level of the government and public sector institutions needs to transform the interest-based financial system into an Islamic financial system.

The government should stop borrowing from the conventional banking system because it could avail financing from Islamic banks and institutions at a local level and external financing from foreign agencies such as the International Monetary Fund, Asian Development Bank, and World Bank, which also offer a Sharia way of financing.

The government and its department should end its financial and transactional matters with the Riba-based system and continue their operations with Islamic institutions which have already designed alternate solutions, he said.

It is pertinent to mention here that Islamic banking has achieved over 20 percent share in the overall banking system with an impressive penetration rate across the local market. Various operations and assets have been converted at a certain level at Pakistan Stock Exchange, Asset Management Companies, and Insurance Companies through Takaful service.

Faisal Sheikh, Head of Islamic Banking at Faysal Bank, said Pakistani Islamic banking and financial industry has established its footing in the economic system with all alternate financial products available for consumers of all levels.

He said the conversion of the huge financial systems will take place in stages and challenges could be addressed with a proper understanding and deliberation in the light of Islamic teaching.

The Pakistani financial system is equipped with talented and experienced human resources for the conversion of Islamic banking, Sheikh further said. Islamic Banking Industry consists of 5 full-fledged Islamic banks (IBs) and 17 conventional banks having Islamic banking branches (IBBs). There are nearly 4,000 branches operating countrywide.

State Bank of Pakistan (SBP) has been very active in promoting Islamic banking in the country, which is acceptable among a majority of the masses compared with conventional banking.

SBP has won this award five times in seven years. SBP was bestowed with this coveted award for the years 2015, 2017, 2018, 2020, 2021, and 2022.The banking regulator unveiled its third five-year Strategic Plan for the Islamic Banking Industry. The strategic plan has set headline targets for the Islamic banking industry to be achieved by 2025.

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