On Thursday, the Federal Shariat Court deemed Pakistan’s Interest Act 1839 un-Islamic, ordering the government to replace the Riba-based financial system with an Islamic one within five years.
On April 12, a full bench of the Federal Shariat Court (FSC), led by Chief Justice Muhammad Noor Meskanzai and including Justice Dr. Syed Muhammad Anwar and Mr. Justice Khadim Hussain M. Shaikh, reserved its decision in the Riba case.
The Shariat Appellate Bench Supreme Court of Pakistan remanded the long-running Riba case in 2002.
The judgement was issued by Justice Syed Muhammad Anwar, who stated that implementing an interest-free banking system in Pakistan is doable, since it is being done by various institutions in the country.
The court concluded that eliminating Riba is the foundation of the Islamic system, and that any interest paid on a loan falls within the category of Riba, which is forbidden in Islam.
The government pays interest on all internal and external obligations. The court decided in Riba and required the government to make interest-free transactions with international institutions such as the International Monetary Fund (IMF) and the World Bank.
The Federal Shariat Court stated in its judgement that the government should remove the term “interest” from all banking laws.
All laws including the term “interest” should be abolished immediately. The judgement said that all laws that use the word “interest” are regarded to be against Islamic law.
According to the Shariah court, any legal clauses containing the word “interest” shall be null and void as of June 1.
Dr. Miftah Ismail, Minister of Finance, praised the Federal Shariah Court’s judgement. The minister stated in a tweet that the government and SBP will conduct a comprehensive investigation into the incident and seek relevant advice from the FSC.
To read our blog on “PM Khan announces Rs. 407 billion interest-free loan program,” click here.
