ISLAMABAD: The Federal Shariat Court (FSC) on Thursday asked the government to eliminate Riba (interest) from Pakistan by Dec 31, 2027 after declaring its prohibition in all forms and manifestations to be Islamic and in accordance with the holy Quran and Sunnah.

The court specified Dec 31, 2027 as the date for the decision to take effect by way of complete elimination of Riba, adding the five years till then are reasonably enough to convert Pakistan’s economy into one that is equitable, asset-based, risk-sharing and interest-free.

Announced by a three-judge bench comprising FSC Chief Justice Muhammad Noor Meskanzai, Justice Dr Syed Muhammad Anwer and Justice Khadim Hussain M Shaikh, the 298-page long overdue judgement also explained that any interest stipulated in the government borrowings acquired from domestic or foreign sources was Riba and clearly prohibited by the holy Quran and Sunnah.

The court directed the federal as well as the provincial governments to complete the necessary legislative amendments to the laws concerned and bring them into conformity with the injunctions of Islam by Dec 31, 2027. It also ordered the government to adopt Shariah-compliant modes in future while borrowing from domestic or foreign sources.

FSC also says any interest in borrowings from domestic or foreign sources was Riba, clearly prohibited in Islam

It referred to what it called the constructive, encouraging and positive approach of the international financial institutions such as the International Monetary Fund, Asian Development Bank and the World Bank to utilise Shariah-compliant, Riba-free financing modes for being more productive and economically feasible.

The present review case was remanded by the Shariat Appellate Bench of the Supreme Court in 2002 for re-consideration of its earlier judgement after the FSC in 1992 held Riba as repugnant to Islam. Consequently, the FSC held 34 hearings in which it consulted petitioners, juris-consults, amicus curiae, economists, experts, scholars, chartered accountants, the attorney general for Pakistan and provincial advocate generals.

The judgement also cited certain submissions in which it was told that China was also willing to utilise the Islamic mode of financing for China-Pakistan Economic Corridor projects, and observed that Pakistan was already utilising Riba-free Shariah-compliant modes of financing while dealing with the Islamic Development Bank and with some Islamic countries.

The verdict explained: “Charging any amount in any manner over the principal amount of a loan or debt is Riba, which is completely prohibited according to the holy Quran and Sunnah of the Holy Prophet (PBUH).”

Similarly, the interest from banks in all forms is Riba whether the loan is taken for commercial, productive or industrial purposes or even for personal or any change in the percentage at which the interest is charged on a loan, whether it is low or high and with any change in the method of calculating the amount of interest upon a loan whether it is calculated as simple interest or doubled or multiplied interest upon a loan is Riba.

The verdict further explained that any transaction of money for an amount of the same denomination and value, where the quantity on both sides is not equal either in a spot transaction or in a transaction based on deferred payment, is Riba. Similarly, a barter transaction between weighable or measurable commodities of the same kind, where the quantity on both sides is not equal or where the delivery from one side is deferred, is Riba. It remains prohibited absolutely irrespective of the name it is called.

The court held that all laws or provisions of laws, which were under challenge before the court and contained the word “interest” within the meaning of banking interest was Riba, hence prohibited, and any payment of extra amount in addition to due payment outstanding to delay, which was considered and calculated as interest over that amount also falls within the category of Riba. Hence, these are also prohibited being repugnant to the injunctions of Islam.

All the prevailing forms of interest either in banking or private transactions fell within the definition of Riba. Therefore, the government is directed to delete the word “interest” wherever it is used in different provisions of law, the judgement said.

The FSC also hoped that the federal government will comply with the mandatory constitutional requirement of Article 29(3) regarding the submission of an annual report before the National Assembly and the Senate on the observance and implementation of the Principles of Policy specifically as stated in Article 38(f) of the Constitution, regarding complete elimination of Riba within the stipulated period.

The judgement said the speedy proliferation and exponential growth of interest-free banking not only in Pakistan, but in the entire Islamic world and even worldwide was a reality that has established that the interest-free banking system was not only practicable, but feasible too.

Meanwhile, in his additional note, the FSC chief justice rejected the objections raised during the hearing that this court lacked jurisdiction.

Published in Dawn, April 29th, 2022