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'Govt not doing needful for interest-free system'

ASIF FAROOQI

ISLAMABAD: The government is not doing as much as is required for the evolution of interest-free economic and banking systems in conformity with the Supreme Court verdict on Riba.

This perception was shared by most of the participants of a seminar organised by the National Institute of Banking and Finance in the backdrop of the SC verdict.

A former deputy chairman of the Planning Commission, Professor Khurshid Ahmed, ex-secretary finance Aftab Ahmed, a retired National Bank president, and other eminent scholars discussed different aspects of the SC verdict and their implications for country's economic and banking system.

Khurshid said that the government had to play a role of catalyst for implementation of the SC verdict. However, he added, it was the shared responsibility of economists, corporate bankers and businessmen and consumers to work for the evolution of the new system.

"The government should lay down legal and institutional frame-work on which a Riba-free society can be built," he said and added that the media, which are under the government control, should also be used for educating people on the issue.

He stressed the need for evolution of a new corporate financial and banking system, "as Islamic economy is something very different" from capital economy minus Riba. "This is the real challenge before us, as the SC has thrown the ball in our court and now there is no escape from it." The point which should be kept in mind is that the economic system after the elimination of Riba must adopt an entirely new look with new system, changed attitudes, infrastructure and responses.

He said: "Our current economic system is defective and the opportunity is here to correct it altogether. In our system, commodity and production have been subsided and money has become the objective." He contended that banks, future role should be of an investor and not a lender.

He said the government was supposed to set up a couple of task forces but nothing has been done so far.

A former finance secretary, Aftab Ahmed Khan, said in the current economic and social culture of the country there was no room for the interest-free economic system. "Revolutionary changes are to be made in the system as well as the attitudes of the corporate sector and consumers to cater to the needs of an interest free system," he said.

Aftab opined that the interest-free economy at the moment is most unsuitable for Pakistan which is being virtually run on the loans from international donors. "Half of our budgetary spending is going to the debt servicing. In such circumstances Islamic banking or economic system cannot be introduced," he said.

The Director General of International Islamic University Sayyed Tahir said there was no question of gradualism towards the elimination of Riba from the economy. "The process has to be started at once and taken to its logical end in the shortest possible time" Tahir added.

He, however, mentioned that certain steps might be set in order to achieve the desired goal, within the same time frame as would be otherwise necessary for elimination of Riba, without causing a jolt to the system.

Discussing the impact on domestic debt, he said, from Shariah viewpoint all existing Riba-based contracts were void and needed to be replaced by equivalent Shariah-organised trade-based or partnership-based contracts.

"As for foreign debts, unless forgiven by the creditors, such debt would have to be either renegotiated or honoured as per schedule," he added.

Dr. Nadeem Inayat, regional director of NDFC, said the Islamic system was against the fixation of interest but not the interest itself.

"Concerns have been expressed that the adoption of an Islamic banking system might lead to a reduction of savings and restrained financial intermediation. It is, however, an empirical question and no conclusive judgment can be given," he added.