Islamic banking system without riba: FSC 5-year deadline “too ambitious” according to Miftah

KARACHI: Federal Finance and Revenue Minister Miftah Ismail said on Tuesday that the 5-year deadline granted by the Federal Shariah Court (FSC) for the conversion of the current mix between Islamic banking and conventional banking based on interests in a fully-fledged Islamic bank without Riba banking system is too “ambitious” and may require a bit more time to achieve the goal.

However, he promised that Pakistan would opt for the implementation of the Riba free banking system, in line with the decisions of the FSC.

Addressing the closing session of the 3rd World Islamic Finance Forum-2022 (WIFF) as a keynote guest via zoom, Miftah said the FSC order is a step in the right direction, and “it There is nothing for Pakistani investors to worry about as the Court took a very informed view in its decision, it would be an evolutionary process of converting from conventional banking to a Sharia compliant bank without Riba.

Islamic finance allows Muslims around the world to participate in banking and purchase government auction documents, etc. Many Muslims do not buy insurance for religious reasons; however, Takaful offered them a replacement.

Islamic Finance Conference: Call to Replace Interest-Based Banking with a Sharia-Compliant System

Banking services without Riba will attract a number of Muslims who otherwise would not engage in the banking system. By only doing conventional banking, we are effectively ignoring a group of Muslim people around the world, including Pakistan, and thus jeopardizing our prosperity. It is very important to meet the financial needs of those Muslims who wish to have nothing to do with conventional interest-based banking. For us to have inclusive growth, we need to allow the unbanked to bank interest-free.

“I confess that I really don’t know enough about Islamic finance and economics to speak very sensibly,” the finance minister said, adding that a number of wonderful people in Pakistan really know the knowledge of Islamic Sharia in finance and banking which guides Pakistan’s efforts towards Islamic banking.

He acknowledged that many institutions, including IBA, work hard to produce good graduates and experts in economics and finance, and many banks have been very successful in employing these graduates. He also acknowledged the role of certain seminaries, including Darul Uloom, in producing graduates and muftis who have sound knowledge of the Islamic financial system.

Themed “Developing the Islamic Finance Ecosystem for Global Prosperity”, the 2-day mega event was organized by the Institute of Business Administration, Center of Excellence in Islamic Finance (IBA, CEIF) here at a local hotel. Acting Governor, SBP Murtaza Syed in his virtual address said that Islamic finance is widely recognized as the fastest growing segment of global finance.

The Islamic economic system focuses on providing a decent and prosperous life for all human beings and guarantees everyone a minimum level of well-being. The main characteristics of Islamic finance are aligned with sustainable development and prosperity. “Without a doubt, Islamic finance is the future of the industry, it depends on your ability to keep pace with the latest global developments and align your strategies accordingly,” Murtaza said.

The government has asked to end the riba-based banking system by 2027

He said one of the themes of this year’s conference was Islamic Financial Technology (Fintech), which is in line with the State Bank’s vision for digitalization and financial inclusion. Fintech is a new revolution in the financial sector, and the technological sophistication of financial institutions has become increasingly important as a strategic way forward.

According to a Global Islamic Fintech Report 2021, it stated that the size of the Islamic Fintech market for OIC countries stands at $49 billion in transaction value, but today it only represents than 0.7% of the global figure. It is expected to grow by 21% to reach $128 billion by 2025.

With around 1500+ Islamic Financial Institutions operating globally, the outlook for Islamic Fintech looks very promising. Fintch can play an important role in promoting Charia Complaint products and services by ensuring fast processes.

Copyright Business Recorder, 2022