Riba-free system from July 1
Ghazi says all transactions under Shariah after Riba prohibition ordinance; international transactions exempted; draft ordinance provides guidelines for govt to reorganise international dealings
ISLAMABAD: With the enforcement of Riba prohibition ordinance by July 1 this year, domestic transactions and internal dealings will be strictly in accordance with Shariah and no person, group of persons, individual, association or any institution will have the authority or freedom to do any Riba-oriented transaction, Religious Affairs Minister Dr Mahmud Ahmed Ghazi told APP in an interview.
In case of violation, the defaulters will incur the penalization provided in the draft ordinance, he added. He pointed out that, at the same time, no court would issue any decree for the enforcement of Riba after the prohibition of Riba ordinance.
As for the international transactions, one should bear in mind that the Supreme Court has not issued any directive on them, he added. This is because the international transactions are not regulated by any law of the parliament, and Supreme Court is striking down some of the laws. Hence international transactions are not directly hit by the judgement of the Supreme Court.
But the proposed law takes international dealings into consideration and has provided some basic principles under which the government will be bound to make efforts to reorganize international dealings in such a way that they conform to the principles of Shariah.
With regard to the time frame for switchover to the interest-free economy, Dr Ghazi said the Supreme Court of Pakistan has already given the time frame for the elimination of Riba. The government has decided and stated repeatedly that it would abide by the time frame set by the Supreme Court.
A transformation commission has been set up by the State Bank of Pakistan which has been given wide responsibilities under the direction of the Supreme Court. The commission is headed by the former State Bank Governor I A Hanafi. It also includes Islamic scholars, Ulema, bankers, economists and lawyers who are expert in corporate financing and law.
The commission has already undertaken the preparation of such instruments and documents which are needed to have a shift-over from the present system to a Riba-free economy. Answering a question on the alternate system or mode of financing
Dr Mahmud Ahmed Ghazi observed that alternate system is no problem. There have been many alternatives developed during the past few decades. Now 200 or even more financial institutions and banks are operating round the globe on Riba-free basis. Some 20 to 25 alternative modes have so for been developed for operating interest-free economy. “I think there would not be any problem at all to have alternative modes of financing, he asserted.”
He said that theoretically all banks have been under obligation to abide within the 13 modes of Islamic financing laid down by the State Bank of Pakistan in 1984. But, unfortunately, those modes of financing have not been followed by the banks which were practically enforced and required by the State Bank of Pakistan on June 20th, 1984 under directive No 13 which was issued by the Vigilance and Implementation Cell of the State Bank.
“So, theoretical, framework is already available with the State Bank. The literature is abundant. The instruments are available and there is absolutely no problem to develop viable alternatives in terms of Modarba, Musharka, etc.” The Supreme Court had too explained some modes of financing by eliminating Riba.
With regard to the operations of the House Building Finance Corporation (HBFC), he said it has already amended its operations. “They have abolished interest up to a certain extent and beyond that extent they have modified their operations and now it is expected that their operations are in accordance with the principles of Shariah.” Asked to elaborate whether service charges were permissible, he said service charges are genuine and based on actual expenditures which are to be recovered.
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