Interest-based banking should be replaced by Shariah-compliant system: Mufti Taqi

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Renowned Muslim Scholar Mufti Taqi Usmani has urged the Islamic banking professionals and other stakeholders of financial institutions to replace interest-based banking with a Shariah-compliant system.

He was addressing a two-day forum organized by the Institute of Business Administration, which was attended by a number of experts from other countries besides delegates from Islamic Banks and financial institutions.

The scholar urged professionals in the Islamic banking industry to come up with workable recommendations to achieve the total elimination of Riba, and make Pakistan an example for the rest of the world to follow.

“It is high time to ponder over the matter and develop a roadmap to achieve this goal, as ordered by the Federal Shariat Court (FSC). It is imperative for all of us, and persons involved in Islamic finance, that we make the roadmap to ensure an interest-free financial system,” said Usmani.

The abolition of Riba from the financial system is not just the need of an Islamic system, rather it is the need of humanity and the world at large. Because of this interest-based financial system, the economies of the world very frequently have had shocks, and due to these shocks, the whole economy gets shattered, as it happened in the crisis of 2008, the scholar said.

Riba, or interest, has been prohibited in all divine books like the Bible and finally the Holy Quran. Jews, Christians, and Muslims all agree that usury was prohibited by Allah. But, unfortunately, this has been the evilest practice in commercial transactions, he added.

State Bank of Pakistan (SBP) Deputy Governor Sima Kamil highlighted six strategic pillars of the Islamic Banking Industry under the Third Strategic Plan 2021-25. She said the plan included strengthening the local landscape, enhancing the conduciveness of the regulatory framework, reinforcing the comprehensive Shariah governance framework, improving the liquidity management framework, expanding outreach and market development, and bolstering human capital.

The deputy governor said the banking regulator has taken some key steps for the promotion of Islamic banking in the country, including the establishment of three centers of excellence, regular issuance of five-year strategic plans to guide the industry, and Shariah-compliant standing ceiling facility and open market operations.

In her detailed presentation, she informed the participants about issues and challenges faced by the Islamic Banking Industry. She said that perception and capacity-building issues, lack of regular supply of sovereign Sukuk, lower penetration in strategic sectors like SMEs and agriculture, lack of research and development of innovative products and services, and adoption of technology and digital transformations are some challenges that need to be addressed.

Seema Kamil said that we had a goal of ending poverty through Islamic Banking and it was an achievable goal.

The forum was also addressed by the Former Chairman of the Reut e Hilal Committee and renowned scholar Mufti Munibur Rehman, Former governor of State Bank of Pakistan (SBP), and Chairman of IBA CEIF Dr. Ishrat Hussain, Director of IBA’s Centre for Excellence in Islamic Finance Ahmed Ali Siddiqi, IBA Executive Director Syed Akber Zaidi, President and CEO of Meezan Bank Irfan Siddiqui, Amir Khan – Chairman Security Exchange Commission of Pakistan, Rizwan Hussain – MD Salam Takaful, Yousuf Hussain – CEO Faysal Bank and others.

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