Articles on Islamic Finance

IEP Forum on FSC Verdict on Riba – Experts View – Mufti Saad Ali Chippa


Mufti Saad Ali Chippa

Research Scholar and Author

Monthly Zouq o Shouq Magazine

Recently, Federal Shari’ah Court of Pakistan has given its judgement on the Riba case. The verdict reaffirmed the historic judgement on interest first given in 1991. But, the subsequent appeals process reopened the case. Concerns about jurisdiction further delayed the implementation of the historic judgement and delayed the case for several years. Now, finally, the verdict has come. The verdict has declared conventional banking interest to be Riba, which is prohibited in Islamic sources of knowledge categorically including Qur’an and Hadith. The judgement has also asked the government to transform the economic system on interest free basis within a period of 5 years to fulfil the constitutional requirement as well as completing the required implementation of the judgement.

Islamic Economics Project is making a humble effort to collect the views of Shari’ah scholars, regulators, practitioners, lawyers and academic experts to deliberate on the future course of action and generate ideas and debate on how to make this transformation possible.

In this regard, we got the chance to get reaction and response from Mufti Saad Ali Chippa. We hope that the views expressed and shared with relevant audience and stakeholders will generate practicable ideas and keep the momentum towards achieving the end goal of an economy that is in compliance with Shari’ah and is able to utilize the instruments and institutions in the Islamic economic teachings.

Question: What is your take on the decision by Federal Shari’ah Court of Pakistan on Riba?

Mufti Saad Ali Chippa: It is the right decision. Bank interest is Riba. The verdict on Riba by Federal Shari’at Court reaffirms this once again.  

Question: Do you think that it is possible to implement the verdict on transformation of economy on interest free basis in 5 years?

Mufti Saad Ali Chippa: It is very much possible. In the domestic sector of the economy, it is quite possible to transform the economy on Riba-free basis. Some background work had already been done by Council of Islamic Ideology. Domestic institutions and their functions need to be evaluated to see where Riba comes in their operations and functions. Then, Islamic alternatives could be used to replace the Riba-based practices.

Previously, this exercise has been done for National Investment Trust, House Building Finance Corporation and some other institutions. Along the same line, process evaluation and need analysis shall be done under the guidance of qualified Shari’ah experts and then Shari’ah compliant solutions shall be introduced by Shari’ah experts.         

Question: What are the measures which can be taken to implement the verdict on transformation of economy on interest free basis in 5 years?

Mufti Saad Ali Chippa: A task force or committee need to be set up comprising experts from the Shari’ah side, legal side, economics side, banking side and regulators side to come up with a workable road map with milestones and targets.

The policy recommendations shall be given from one platform by this task force to the government. The government in turn shall give due importance to these policy recommendations. Laws and policies including monetary policy, fiscal policy, public policy and economic planning shall be reformed in the light of these recommendations.

Question: What are the important obstacles that can be encountered along the way of transformation process?

Mufti Saad Ali Chippa: Without planning, strong advocacy of reforms by the stakeholders and committed efforts by the regulators, things may not move quickly.

World Bank and IMF may not feel it urgent or even necessary to follow the Federal Shari’at Court Verdict. After sometime, the government may also lose sight of the goal amidst political and economic crisis.

That is why, to begin with, commercial banking needs to be Islamized first. It is the most important part of the financial system and is now increasingly owned by domestic sponsors.

The major sponsors of banks and central bank need to Islamize commercial and central banking. Once domestic financial system achieves successful transition, it will provide a strong case and evidence for how Islamic banking and finance solutions can be utilized in contemporary economies.  

Disclaimer: The views shared by the interviewee in this forum are personal opinions and judgements and do not represent the official representation of the principal institution with which they are affiliated.

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