B 2

CONTENTS
Dedication
2
Foreword
3
Prohibition of interest and governments duty 11
Islamic alternative of interest
16
Oeration of !"#$%based interest%free
21
ban&ing system
'enefits of !"#$%based interest%free ban&ing 3(
Domestic debt retirement in !"#$%based ()
interest%free regime
Foreign debt retirement in !"#$%based
*+
interest%free regime
,n-ustified bias against !"#$
6+
.olutions of roblems raised in governments )+
etition of 13 % 2 % // to Federal .hariat #ourt
1
0nne1%1 #alculations showing use of !"#$ 12/
for large scale financing
0nne1%2 #alculations showing use of !"#$ 112
for financing a defence facility
2
DEDICATED
TO
Late Professor Shaikh Mahmud Ahmad.
3e was Pa&istans most outstanding
economist and research scholar4 3e conceived
the idea of institutionali5ing Islamic rincile
of Qard Hasan4 3e devised a financial
instrument based on Qard Hasan and named
it !ime "ultile #ounter $oan%!"#$ which
can erform in Islamic way all the financial
intermediation functions erformed by
interest in the modern ban&ing system4 3e
leaded for eliminating interest by relacing it
with !"#$ in the ban&ing system4 "ay 0llah
reward him graciously for his magnificent and
uni6ue effort in devising racticable way to
interest%free ban&ing4 !he writer of this
boo&let has drawn freely from the valuable
arguments and information given in his most
recious boo&s 7!owards Interest%free
'an&ing in 8nglish and 7sood ki mutabadal
assas in ,rdu4
3
FOREWORD
O YE WHO BELIEVE FEAR ALLAH AND
GIVE UP WHAT REMAINS OF INTEREST
IF YE ARE BELIEVERS AND IF YE DO IT
NOT BE WARNED OF WAR FROM ALLAH
AND HIS RASOOL (SAWS) . (!"#$"%&
T'E PREL(DE
If the above 9uraanic #ommand and :arning are
roerly understood and heeded no "uslim can
ever underta&e any interest%based business; no
"uslim economist can ever suggest continuation
of interest%based transactions for any reason and
no "uslim ruler can ever ermit interest%based
transactions in any circumstances; because
nothing can be as disastrous as an act of war
against 0llah and 3is <asool saws4
T'E TRA)ED*
In total disregard of the ideological base of our
country; our economy managers in collusion with
(
self%serving corrut rulers and vested interests;
romoted interest%based olicies and ruined the
economy to such an e1tent that even for debt
servicing we have to beg for fresh loans and
when a loan on interest is doled out to us for
meeting a debt commitment it is ronounced to
be a sign of recovery of economy whereas in fact
it increases our debt burden and leads the country
to drown ever dee into the debt morass4
"erchants of =enice are dictating conditionalities
and ushing us into economic slavery4 !hey are
near grabbing our strategic and rofit earning
installations li&e P!#$ to ermanently disable us
to come out of the debt tra4
T'E REMED*
<e&indle the faith in 0llahs "essage and arouse
the belief that abiding by Islamic teachings
always brings good results and that whatever is
ordained in 9uraan is racticable at all times and
in all circumstances4 0nd resolve to finish
immediately the disastrous on%going war against
0llah and 3is <asool saws by abolishing interest
at once in one stro&e as gradualism in eliminating
interest amounts to ste%by%ste cease%fire which
is an absurdity4
*
T'E C'ALLEN)E
!he final verdict of the .ureme #ourt of
Pa&istan >.hariat 0ellate 'ench? in the Riba
case that interest in all its forms is Riba
rohibited in 9uraan has shifted the debate to the
6uestion as to what is the alternative financial
instrument which can effectively relace interest
in the modern ban&ing system4 0dvocates of
interest are trying hard to convince the concerned
authorities that such an alternative does not e1ist
and that even Islamic ban&s including their leader
Islamic Develoment 'an& cannot do without
interest4 !hey are ointing out shortcomings of
Islamic ban&s to frustrate the movement for
abolition of interest4 One of them Dr406das 0li
@a5mi has osed inching 6uestions about
Islamic ban&s in an article ublished in D0:A of
12
th
Feb 2222; of which the following 6uoted
challenging 6uestions are difficult to answer
because Islamic ban&s have not yet felt the
comulsion or necessity to commence ure
lending oerations li&e conventional ban&s4
0dotion of !"#$ as loaning device for lending
oerations will enable the Islamic ban&s to
overcome their shortcomings and attain true
Islamic character4
6
(i) Is there any single ban& in the Islamic or
Aon%Islamic world which is truly run on
an interest%free basisB
(ii) #an a #entral 'an& conduct its monetary
olicy without a norm of interestB
(iii) 0re not the ractices of Islamic ban&s a
6ueer blend of interest%based modes of
finance carrying a faCade of Islamic
namesB
(iv) :hat are e1actly the Islamic comliant
instruments of financeB #an these
instruments meet the myriad and diverse
needs of modern trade; finance and
ban&ingB
(v) :hen and where have these instruments
been alied and with what degree of
successB
(vi) Does the Islamic Develoment 'an& as the
model Islamic ban& oerate on interest%
free basisB If that is the case why did it
offer to e1tend a loan to the government of
Pa&istan after nuclear detonation at an
interest rate of *D above $I'O<B
(vii) 'y what mechanism can Islamic ban&s
underta&e financial intermediation which
+
is the rimary function of all commercial
ban&s throughout the worldB
T'E ANSWER
)
.atisfactory answer to all the above 6uoted
challenging 6uestions lies in true Islamic
ban&ing based on !"#$ which is the
Islamic alternative of interest4 Eust as it is
absurd to conclude from the failings and
shortcomings of millions of "uslims that
Islamic teachings are imracticable; it is
also absurd to conclude from the
shortcomings of e1isting Islamic ban&s that
interest%free true Islamic ban&ing is
imracticable and that there is no e6ually
efficient and effective Islamic alternative
financial instrument which can relace
interest in the ban&ing system4 !his boo&let
amly demonstrates that the non%
e1loitative Islamic financial instrument
!"#$ which is based on Islamic concet of
Qard Hasan is as effective and efficient
lending instrument as interest and that it can
erform in Islamic way all the financial
intermediation functions erformed by
interest in the modern ban&ing system and
that !"#$ can easily relace interest in one
stro&e without causing any disrution in the
ban&ing system4
T'E PROCED(RE
i) 8nforce immediately total ban on interest%
based transactions and declare negotiations
/
for any such transaction to be a cogni5able
offence4

ii) 8nforce immediate total ban on interest%
based saving schemes and ri5e bonds4
iii) Order immediate stoage of all interest
ayments and receits in the country and
declare aying and charging of any
interest to be cogni5able offence4 Our
Prohet "ohammad saws who was of all
man&ind the most -ust; the most truthful
and the most benevolent erson and
whose ways are all e1emlary; invalidated
all interest earnings which were due for
ayment on debts outstanding at the time
of revelation of the 9uraanic verse
rohibiting interest4 !he method for
retiring government domestic debts under
!"#$ ban&ing system is fully described
in this boo&let4
iv) Order immediate commencement of
negotiations for converting domestic
outstanding interest%based loans into
!"#$%based transactions4
v) Order all ban&s and financial institutions
to immediately sto granting of loans on
interest and commence granting of loans
on !"#$ basis4
12
vi) 3owsoever urgent a re6uirement may be;
no fresh foreign loan on interest shall be
ta&en4 0voiding an act of war against
0llah and 3is <asool saws is far more
urgent a re6uirement than any other
re6uirement4 3owever outstanding
foreign debt commitments shall have to
be fulfilled; although foreign lenders can
be re6uested to accet suitable alterations
in loan contract agreements4 !he method
for retiring foreign debts under !"#$
ban&ing system is fully described in the
boo&let4
T'E REWARDS
The +ook,et demo-strates ho. TMCL/+ased
+a-ki-0 .i,, raise ,oa-i-0 1a2a1it3 of +a-ks$
redu1e u-/em2,o3me-t$ i-1rease 2rodu1tio-$
raise 0o4er-me-t re4e-ues$ e-a+,e the 1ou-tr3
to retire forei0- a-d domesti1 de+ts a-d sa4e
,ar0e sums of mo-e3 for s2e-di-0 o-
de4e,o2me-t a-d so1ia, .e,fare 2ro5e1ts.
Ado2tio- of TMCL as ,oa-i-0 i-strume-t +3
Is,ami1 +a-ks .i,, +ri-0 the fo,,o.i-0 +e-efits
to Is,ami1 +a-ks a-d the Mus,im ummah6
11
1. It .i,, fa1i,itate i-ter/+a-k i-terest/free
,oa- tra-sa1tio-s.
2. It .i,, fa1i,itate setti-0 u2 of a Ce-tra,
De2ositor3 for mo+i,i7i-0 sur2,us fu-ds of
Is,ami1 +a-ks a-d 0o4er-me-ts o- TMCL
+asis a-d ad4a-1i-0 to them i- times of
-eed TMCL/+ased i-terest/free ,oa-s.
3. It .i,, fa1i,itate uti,i7atio- of the fi-a-1ia,
resour1es of the Mus,im ummah i-
de4e,o2i-0 Mus,im 1ou-tries throu0h the
Ce-tra, De2ositor3$ i-stead of +ei-0
di4erted to .ester- fi-a-1ia, markets.
89/88/999 A+du, Wadood :ha-
12
PRO'I;ITION OF INTEREST
AND )O<ERNMENT=S D(T*
Interest is so severely rohibited that 9uraan
holds warding off interest as condition of Iman
and declares war from 0llah and 3is <asool saws
against eretrators4 If 0llahs message has any
meaning interest cannot e1ist in any "uslim
society4 3owever during the ast several decades
our economy managers romoted interest%based
olicies which ruined the countrys economy4
In its e1haustive -udgment of 23rd Dec4 1///;
.ureme #ourt of Pa&istan >Shariat 0ellate
'ench? finally set aside all the misleading
contentions in suort of interest and held that
interest in all its forms; big or small; and
regardless of the urose of loan; is Riba
rohibited by the 3oly 9uraan4 !he ae1 court
also assed an order to transform the e1isting
financial system to the one conforming to
shariah4
Aow the die%hard advocates of interest have
started roagating that there is no viable
alternative of interest and that the whole ban&ing
system will be disruted if any attemt is made to
eliminate interest4 !his boo&let demonstrates that
!"#$ >!ime "ultile #ounter $oan? is as good
a loaning instrument as interest and that it can
13
effectively relace interest instantly without any
difficulty and disrution in the ban&ing system4
!he last chater gives solutions of all the
roblems regarding elimination of interest; raised
by the revious government in its etition of 13%
2%1/// to the Federal .hariat #ourt4
8limination of interest is the fundamental
rere6uisite for Islami5ing the ban&ing system
and saving the country from drowning ever dee
into the debt morass4 It is a wrong notion that
elimination of interest will be harmful if it is
enforced without first bringing about other radical
imrovements in the socio%economic structure4
Islamic way of evolutionary rocess for
eradicating evils from the society is to struggle
for finishing all evils and not to ma&e elimination
of one evil deendent on the elimination of other
evils because such an aroach sets u a vicious
circle of evils and no evil is finished4 81tinction
of interest alone may not cure all economic evils;
but it will certainly bring immense good as it will
finish the on%going war with 0llah and 3is
<asool saws4 !as& to reform the entire socio%
economic structure must be underta&en but it will
be a folly to ostone elimination of interest and
continue warring against 0llah and 3is <asool
saws which would only aggravate socio%
economic miseries and render accomlishment of
reform tas& imossible4
1(
Our finance and economy managers will do well
if they ignore baseless contentions and unfounded
fears roagated by advocates of interest and
instead ay heed to 0llahs warning in 9uraan F
GWHOSOEVER VIOLATES MY COMMA!S
VERILY "OR HIM LIVELIHOO! WILL
#ECOME !ISTRESS"$LH >22F12(?4
!hey should roceed unhesitatingly to imlement
Divine #ommand to abolish interest laying trust
in 0llahs assurances in 9uraan F GWHOSOEVER
"OLLOWS MY %$I!ACE WILL OT LOSE
HIS WAY OR "ALL ITO MISERYH >22F123?
and F GTO HIM WHO #ELIEVES I ALLAH
A! THE LAST !AY A! "OR THOSE WHO
"EAR ALLAH HE &'('r) *RE*ARES A WAY
O$T+ A! HE *ROVI!ES "OR HIM "ROM
&sour,'s) HE EVER CO$L! IMA%IE+ A!
I" AYOE *$TS HIS TR$ST I ALLAH-
S$""ICIET IS ALLAH "OR HIMH >6*F2;3?4
!he ae1 court order is final; unchallengeable and
binding uon the government4 It is
comrehensive; une6uivocal and e1act and leaves
no loo%hole or e1cuse whatsoever for allowing
the curse of interest to continue to ravage our
economy4
<ule of law demands enforcement of the ae1
court order and as such it is the bounden duty of
1*
the government to ensure elimination of interest
and earn 0llahs blessings which are necessary
for ta&ing the country out of the social and
economic turmoil4
Aothing can be as reugnant to common sense as
to suggest division of a Divine #ommand into
arts and recommend elimination of interest in
several hases4 0t any oint of time one can be
either a faithful or a rebel and either at eace or at
war but in no case both faithful and rebel or
artly at eace and artly at war4 Fundamental
rincile of Islamic -urisrudence is that the
shariah laws which had reached finality during
the lifetime of our Prohet saws must be fully
imlemented at once and not in arts4 8very
Divine #ommand was acted uon immediately
after revelation4 #learly gradualism in abolishing
interest is an absurdity4
,shot of the above discussion is that in order to
save themselves and the nation from 0llahs
wrath arising from indulgence in the most
heinous crime in Islamic -urisrudence; our rulers
should at once sto interest%bearing savings
schemes and ut a comlete ban on ta&ing fresh
loans on interest and on aying and charging of
interest and declare it to be a cogni5able offence
with immediate effect4 !his can be done by
issuing an ordinance as has been done in the ast
16
on many occasions4 !he time schedule given in
the ae1 court order should be used only for
legislation and framing of rules and rocedures
and not for continuing interest%based activities4
3on4 Eustice :a-ihuddin 0hmad has atly
stressed in the -udgment .Th'r' should b' no
mis/i(in/s- in an0 1uart'rs that this or th'
"'d'ral Shariat Court would brook an0
unn','ssar0 d'la0 durin/ th' im2l'm'ntation
2has' o3 th' 4ud/m'nt o3 this Court+ Thus- tim'
s,h'dul' or not- no on'- b' it th' /o('rnm'nt
its'l3 would an0 lon/'r b' ,ount'nan,'d to
,ondu,t an0 3urth'r a(oidabl' Ribawi d'alin/s-
h'r' or with th' outsid' world+ Trans/r'ssions- i3
an0- ,an b' a22ro2riat'l0 brou/ht to th' noti,' o3
th' Court54
1+
ISLAMIC ALTERNATI<E OF
INTEREST
"odern ban&ing system has layed a &ey role in
the economic and industrial develoment by
roviding finance widely and freely to industry
and trade through interest%based credit and loans;
although interest ayments are e1loitative as
these are from those who have money less than
what they need to those who have money in
e1cess of their needs4 Islamic aroach to un%
Islamic institutions has throughout been to use
them beneficially after eliminating un%Islamic
elements from them4 0fter the con6uest of
"a&&ah; only the idols from 6aabah were
removed and every thing else was left intact4
,mer%bin%@hattab rta instructed governors
aointed in newly con6uered territories not to
interfere in the local customs and traditions unless
there was something un%Islamic in them4 In our
case sensible strategy is to ma&e the established
ban&ing system Islamically accetable by
in-ecting only essential modifications most
imortant of which is to relace interest by a non%
e1loitative Islamic lending device which can
erform in Islamic way all the financial
intermediation functions erformed by interest in
the resent system4
1)
'asic ob-ective of Islamic Financial .ystem is
need fulfilment and needs may be for financing
industry; trade; agriculture or consumtion4 For
need fulfilment 7akat and Qard Hasan are
Islamic financial instruments4 7akat caters for the
needs of the oor and destitute whereas Qard
Hasan caters for financial needs of others4 Qard
Hasan is loaning without additional charge over
and above the rincial amount4 It can be used
widely and freely in financial intermediation
between those having money in e1cess of their
needs and those having money less than their
needs and that is what the ban&s do4 It is
absolutely wrong notion that Qard Hasan is
meant only for the oor and destitute and not for
develoment financing4 Islam actually encourages
widesread use of Qard Hasan for need
fulfilment as according to a Hadith of our Prohet
saws reward for lending is eighteen times
whereas reward for charity is ten times4 !here is
no bar in Islam on borrowing for business or
roduction4 Only those borrowers who do not
reay loans are severely rerimanded4
Practical alication of Qard Hasan for
eliminating interest is strongly recommended in
the research thesis 7*REVETIVE MEAS$RES
I ISLAM A%AIST ITEREST8 on which
Dr4Fa5l%e%Ilahi was awarded Ph4D4 3e has
emhasi5ed in his thesis the vital role which
1/
Qard Hasan can lay in abolishing interest4 3e
concluded the chater on Qard Hasan with the
assertion .'92andin/ th' 3i'ld o3 this wa0 o3
l'ndin/ will b0 Allah8s /ra,'- aid in blo,kin/ th'
wa0 o3 int'r'st+ Th'r'3or' in this ,ont'9t I ur/'
u2on all thos' who want to abolish int'r'st to do
what'('r th'0 ,an to '92and th' 3i'ld o3 this wa0
o3 l'ndin/54
#ouncil of Islamic Ideology in its reort of Eune
1/)2 held rofitIloss sharing or Qard Hasan to be
ideally the real alternatives of interest under an
Islamic 8conomic .ystem4 ProfitIloss sharing
system cannot meet the financial needs of credit%
worthy entrereneurs unwilling to share rofit4
#redibility of most of the entrereneurs willing to
share rofit is doubtful4 #ouncil of Islamic
Ideology also ac&nowledged in its reort
.di33i,ulti's 3a,'d in th' 2ra,ti,al a22li,ation o3
th' 2ro3it:loss sharin/ s0st'm in its 2ur' 3orm on
a,,ount o3 th' 2r'(al'nt standards o3 moralit0 in
th' so,i't054 !hus in our circumstances Qard
Hasan remains the only ideal racticable
alternative of interest4
$ate Professor .hai&h "ahmud 0hmad
>identified in the ae1 court -udgment as our
countrys most outstanding economist and
researcher? devised a financial instrument based
on Qard Hasan and named it !"#$%!ime
22
"ultile #ounter $oan4 It can erform in Islamic
way all the financial intermediation functions of
interest%based ban&s4 Perhas because he was not
a rofessional economist !"#$ did not get any
ublicity4 0lso it did not receive any official
attention because self%serving ast rulers of our
country had no will to abolish interest and ull
the country out of the debt morass4 Aow; for
imlementing the ae1 courts order; our
economy managers must genuinely be loo&ing for
a true Islamic alternative of interest which can
effectively relace interest swiftly and easily
without any disrution in the ban&ing system4
!"#$ meets all these re6uirements and it is the
surest; simlest and 6uic&est means to convert the
resent ban&ing system into interest%free system4
!his ob-ective cannot be achieved by the ban&ing
roducts currently used by Islamic ban&s4
0 !"#$ transaction between two arties consists
of two simultaneously e1ecuted searate interest%
free loan >Qard Hasan? contracts such that the
multile of the amount and eriod of one loan
e6uals the multile of the amount and eriod of
the other loan4 It facilitates interest%free
borrowing of large amounts against counter loans
of much smaller amounts advanced for
roortionately longer eriods4 For e1amle; an
entrereneur needing <s4 12 million for one year
can get this loan >against collateral as at resent?
21
by advancing a loan of <s4 1 million to the ban&
for 12 years4 !hus !"#$ fulfils the clients
financial need and also enables the ban& to earn
rofit from long%term investment of the counter%
loan money4 !he ban& does not earn any interest
on the loans advanced by it and whatever gain or
loss it earns comes from long%term investment of
counter%loan amounts which are actually
borrowed sums and in Islam there is no bar on
investing borrowed sums in business4
In a !"#$ transaction the ban& and the client do
good to each other and as such it conforms with
the 9uraanic recet GHAL ;A7A<$L<IHSA
ILLA<AL<IHSAH and the noble teaching of our
Prohet saws that a favour done to any one
should be recirocated4 !"#$ also aves the way
to interest%free ban&ing which is the most urgent
need of the "uslim ummah and articularly of
Pa&istan at the resent -uncture4
22
OPERATION OF TMCL/;ASED
INTEREST/FREE ;AN:IN) S*STEM
1. )ENERAL
<elacement of interest by !"#$ is the surest;
simlest and instant means to eliminate interest
without any disrution in the ban&ing system4 In
the interest%free regime ban&s will continue to
function as at resent with the following basic
changes4F
(i) No i-terest .i,, +e 1har0ed or 2aid
(ii) Tra-sa1tio-s i-4o,4i-0 1redit .i,, +e
+ased o- TMCL
(iii) I-stead of ear-i-0 i-terest$ +a-ks .i,,
ear- 2rofit +3 i-4esti-0 i- ha!"ah/
1om2,ia-t modes of their 1hoi1e
81ceting comliance with alicable foreign
e1change regulations same rocedures will aly
to local and foreign currency accounts and
transactions4 Following salient features of
!"#$%based 'an&ing ma&e it 6uite clear that
switch%over to interest%free system can be carried
out smoothly without any interrution or
difficulty4
23
2. AD<ANCEMENT OF LOANS
0ll loans will be interest%free and will be
advanced on !"#$ basis >against collateral as at
resent?4 In the beginning time multile ratio in
!"#$ is roosed to be ten which can be altered
later on; if necessary4 For e1amle a loan of <s
1242 " re6uired for one year will be granted
against counter%loan of <s 142 " advanced to the
ban& for 12 years4 If the borrower re6uires
e1tension in the reayment eriod the ban& may
agree to it if the borrower advances another
aroriate counter%loan to the ban&4 For e1amle
if an e1tension of 3 months is re6uired in the
above mentioned case the ban& would re6uire the
borrower to advance another counter%loan of <s4
242* " for 12 years4 If the borrower is unable to
advance another counter%loan; the ban& may
accet his re6uest if he agrees to receive his
original counter%loan money from the ban& in 12
J years instead of 12 years4 In the event of
default the ban& may ma&e recovery from
collateral or through legal action as at resent4 In
case of delay in recovery the ban& may retain the
borrowers counter%loan money for an aroriate
e1tended eriod4
In certain cases; if so needed by the borrower or
the ban&; they may agree on any time multile
ratio other than the normal ratio4 Aormally the
"onetary 0uthority need not interfere in this
2(
matter; but if at any stage it is considered
necessary; for controlling the credit availability or
for any other reason; the "onetary 0uthority may
fi1 the time multile ratio or vary it eriodically4
3. SETTLEMENT OF O(TSTANDIN)
INTEREST/;ASED LOANS
,on interest becoming illegal; outstanding
interest based loans will have to be converted into
!"#$%based transactions4 !he borrower will
reay the rincial amount of the loan on due
date and instead of aying interest; the borrower
will advance to the ban& a counter%loan such that
the multile of the loan amount he too& and the
eriod of the loan availed e6uals the multile of
the counter%loan amount and the eriod of
counter%loan4 Interest already aid rior to
initiation of interest%free regime will not be
sub-ect to recovery4
E>am2,e 8F $oan of <s4 1242 " was ta&en from
ban& for 1 year and is now due for reayment in
the interest%free regime4 !he borrower will reay
the rincial amount <s4 1242 " to the ban& and
instead of aying interest will advance to the
ban& counter%loan of <s4 1242 " for 1 year or by
mutual agreement <s4 *42 " for 2 years; or <s4
242 " for * years; or <s4 142 " for 12 years etc4
2*
E>am2,e F $oan of <s4 1242 " was ta&en from
ban& for 2 years of which 1 year has assed and
no interest has been aid4 !he borrower will
return the rincial amount <s4 1242 " on due
date and instead of aying interest will advance a
counter%loan of <s4 1242 " to the ban& for 2 years
or by mutual agreement <s4 *42 " for ( years; or
<s4 (42 " for * years or <s4 242 " for 12 years
etc4
E>am2,e ?F $oan of <s4 1242 " was ta&en from
ban& for 2 years of which 1 year has assed and
interest for 1 year has been aid4 On due date
falling in interest%free regime the borrower will
return the rincial amount <s4 1242 " to the
ban& and instead of aying interest for the 2
nd
year will advance counter%loan of <s4 1242 " to
the ban& for 1 year or by mutual agreement <s4
*42 " for 2 years; or <s4 242 " for * years; or <s
142 " for 12 years etc4
4. ENCAS'MENT OF ;ILLS$ ;ONDS$
DE;ENT(RES ETC.
0s no interest will be ayable in interest%free
regime bills; bonds and all such other interest%
bearing documents will be encashed at face value
and the interest content in them will be converted
into aroriate !"#$ such that the multile of
the amount and the eriod availed e6uals the
multile of the amount and the eriod of counter%
26
loan4 Interest ayments already made rior to
initiation of interest%free regime will not be
sub-ect to recovery4
E>am2,e 8F 0s er contract 0 rovided to '
goodsIservices for <s4 142 " ayable after 1 year4
0 draws a bill of <s4 142 " on ' ayable after 1
year and sells the bill to # against cash ayment
of <s4 24/2 "4 On maturity date falling in
interest%free regime # resents the bill to ' for
ayment4 ' will ay <s4 24/2 " to # and <s4 2412
" to 0 and 0 will advance an interest%free loan of
<s4 24/2 " to # for 1 year or by mutual
agreement <s4 24(* " for 2 years or <s4 2412 "
for / years or <s4 242/ " for 12 years etc4
E>am2,e F 0s er contract 0 rovided to '
goodsIservices for <s4142 " ayable after 1 year4
year4 0 sells the bill to # against cash ayment of
<s4 24/* " half year before maturity date4 On the
maturity date falling in interest%free regime #
resents the bill to ' for ayment4 ' will ay <s4
24/* " to # and <s4 242* " to 0 and 0 will
advance to # an interest%free loan of <s4 24/* "
for J year or by mutual agreement <s4 24(+* "
for 1 year or <s4 242/* " for * years; or <s4
242(+* " for 12 years etc4
2+
E>am2,e ?F 0s er contract 0 rovided to '
goodsIservices for <s4 142 " ayable after 1 year4
year4 0 sells the bill to # against cash ayment of
<s4 24/* " J year before maturity date4 # sells
the bill to D against cash ayment of <s4 24/+* "
K year before maturity4 On the maturity date
falling in interest%free regime D resents the bill
to ' for ayment4 ' will ay <s4 24/+* " to D
and <s4 2422* " to 0 and 0 will advance to D an
interest%free loan of <s4 24/+* " for K year or by
mutual agreement <s4 24()+* " for J year or <s4
242(3+* " for 1 year or <s4 2422(3+* " for 12
years etc4
E>am2,e @F ( J years rior to initiation of
interest%free regime 0 issued a bond of <s4 142 "
face value at discount of 2 ercent with interest
ayable every year and maturity eriod * years4 '
bought the bond at the time of issue against cash
ayment of <s4 24/) " and received interest from
0 for ( years4 On the maturity date falling in
interest%free regime 0 will ay to ' <s4 24/) "
and instead of aying interest for the last year 0
will advance to ' interest%free loan of <s4 24/) "
for 1 year or by mutual agreement <s4 242/) "
for 12 years or <s4 24(/ " for 2 years etc4
E>am2,e AF ( J years rior to initiation of
interest%free regime 0 issued a bond of <s4 142 "
2)
face value at 2 D discount; interest ayable every
year and maturity eriod * years4 ' bought the
bond at the time of issue against cash ayment of
<s4 24/) " to 04 0fter ( years; having received
interest for ( years; ' sold the bond to # against
cash ayment of <s4 1422 "4 On the maturity date
falling in interest%free regime 0 will ay <s4 1422
" to # and instead of aying interest for the last
year 0 will advance to # an interest%free loan of
<s4 1422 " for 1 year or by mutual agreement <s4
24*1 " for 2 years or <s4 24122 " for 12 years
etc4
E>am2,e BF 0 is a holder of a bill of face value
<s4 142 " drawn on '4 0 wants to encash the bill
32 days before maturity4 !he ban& will ay <s4
142 " to 0 against a counter%loan of <s4 2412 "
for 322 days or by mutual agreement <s42422 "
for 1*2 days or <s4 242* " for 622 days etc4 !he
ban& will recover <s4 142 " from ' on the
maturity date and will return the counter%loan
money to 0 on the agreed date4
5. C(STOMERS= ;AN: ACCO(NTS
'an&s will continue to receive deosits in
customers accounts and issue che6ue boo&s to
account holders4 !here will be two tyes of
accounts; demand deosit and investment
accounts4 81isting account holders will be given
2/
the choice to convert their accounts into demand
deosit andIor investment accounts4
Dema-d De2osit A11ou-tsF <efund on demand
of art or full amount in these accounts will be
guaranteed by the ban&4 !he ban& will have the
right to invest the amounts in these accounts at its
own ris& and resonsibility4 !he ban& will not
share any rofit or loss incurred with the account
holders4 'an&s will have the discretion to fi1
minimum balance to be maintained in these
accounts4
I-4estme-t A11ou-tsF 'an&s at their own
discretion will invest the amounts in these
accounts in business or industry and will share
the rofit or loss earned with the account holders
on daily roduct basis4 0ddition of rofit or
deduction of loss will be ad-usted in the accounts
on yearly or half%yearly basis4 :ithdrawals from
these accounts may be sub-ect to certain
limitations as are savings accounts at resent4
I-terest/Ear-i-0 Sa4i-0 A11ou-ts will cease to
earn interest in the interest%free regime4 0ll
savings account holders will resumably ot for
investment accounts4 It is misleading contention
of the advocates of interest that non%ayment of
interest will induce account holders to withdraw
their savings from ban&s4 Ao doubt interest
earnings will cease but there would be ositive
32
chances to earn more rofit from investment
accounts in ban&s4 "oreover it would be very
unwise for savings account holders to withdraw
their money from ban&s because there is no
alternative available to them to &ee their money
in safe custody with facility of ma&ing ayments
by che6ues and receiving ayments against
crossed che6ues mar&ed Gayees account onlyH4
8ven if some account holders angered by non%
ayment of interest to them withdraw their
deosits from ban&s; their money will come bac&
to the ban&ing system through somebody elses
account as and when they invest or send the
withdrawn money4
6. ISS(E OF LETTERS OF CREDIT$ ;AN:
DRAFTS$ ;AN: )(RANTEES ETC.
$egal and financial aers not involving any
credit will be issued by ban&s as at resent
against aroriate fees and charges4 In the event
of ban& having to advance any credit or bloc&ing
its money for the client; the client will advance an
aroriate interest%free loan to the ban& such
that the multile of the loan amount and its eriod
e6uals the multile of the credit advanced by the
ban& or the money bloc&ed by it and its eriod4
For such eventuality the ban& may re6uire the
client to ma&e some deosit in advance; but in no
case interest will be charged or aid4 For
e1amle; if the ban& has to art with or bloc& <s4
31
142 " for one wee& the client will advance to the
ban& <s4 142 " for 1 wee& or by mutual
agreement <s4 241 " for 12 wee&s or <s4 242* "
for 22 wee&s etc4
7. CENTERAL ;AN: AND DEPOSITOR*/
C(M/LENDER OF LAST RESORT
In the interest%free regime there will be no role of
interest%based treasury bills and bonds etc4 and all
such documents will cease to be issued and no
function involving interest will be underta&en by
the #entral 'an&4 Other functions not involving
interest will be erformed as at resent4 !he
#entral 'an& will set u under its ausices a
framewor& of #entral Deository%cum%lender of
last resort for mobili5ing surlus funds of ban&s
and federal and rovincial governments and
autonomous bodies and advancing interest%free
loans to them in times of need4 !he #entral
Deository will receive deosits and advance
interest%free loans on !"#$ basis4 For e1amle;
if a ban& has a surlus of <s4 *42 " for 1 month;
it may deosit this sum for 1 month with the
#entral Deository and obtain an interest%free
loan of <s4 24* " for 12 months4 If a ban& is
short of li6uidity and re6uires <s4 1242 " for 1
wee&; it will obtain from the #entral Deository
an interest%free loan of <s4 1242 " for 1 wee& by
deositing <s4 142 " with the #entral Deository
for 12 wee&s4
32
8. OPEN MAR:ET OPERATIONS
In the interest%free regime oen mar&et oerations
will be confined to e1change of interest%free loans
and counter%loans with the #entral Deository
and commercial ban&s and urchase and sale of
stoc&s and shares until such time as Islamic
8conomists and 'an&ers come u with some
other mar&etable asset%based shariah%comliant
instruments4
9. )O<ERNMENT ;ORROWIN)S
In the interest%free regime interest%bearing saving
schemes; treasury bills and bonds etc4 will not be
available to the government for raising funds4 For
financing budgetary deficit and meeting other
urgent financial re6uirements li&e rocurement of
war funds; the government will borrow from
#entral Deository andIor commercial ban&s on
!"#$ basis4
10. LIC(IDIT* ARRAN)EMENT
'an&s will deosit 22D of each counter%loan
amount with the #entral%Deository for 12 years
against which #entral Deository will allow
ban&s to draw 222D of counter%loan amount for 1
year4 !his will rovide 22D li6uidity for the
ban&s4 0dditional 2D li6uidity will be obtained
by &eeing 22D of counter%loan amount as till
money in the ban&s4 !hus total li6uidity achieved
33
by the ban&ing sector will be 22D4 For e1amle;
let total deosit in a ban& be <s4 12242 " all of
which is loaned out against receit of counter%
loans totaling <s4 1242 "4 22D of <s4 1242 " >L2
"? will be deosited with the #entral Deository
for 12 years against which the ban& will be able
to draw 222D of <s4 12 " >L 22 "? for 1 year4
!his will rovide 22D li6uidity for the ban&4
0dditional 2D li6uidity will be obtained by
&eeing 22D of total counter%loan amount >i4e4
<s4 242 "? as till money4 !his will raise the
li6uidity of the ban& to 22D which is more than
sufficient4 3owever if the "onetary 0uthority so
desires the li6uidity ercentage can be raised or
lowered by varying the ercentage of counter%
loan money to be deosited with the #entral
Deository4
11. PROFIT EARNIN) ;* ;AN:S
0s shown in the revious clause on li6uidity
arrangement; from the total counter%loan money
received by the ban&s 22D will go to the #entral
Deository and 22D will be held as till money4
!he remaining 62D of the total counter%loan
money will be available to the ban&s for long%
term investment in shariah%comliant rofitable
modes of their choice4 !he ban&s will be free to
enter into rofitIloss sharing arrangement with
entrereneurs whom they consider to be trust%
3(
worthy4 'an&s themselves will decide how much
and where they should invest4
12. CREDIT CONTROL
0t resent interest rate mechanism is used to
control credit availability4 In the interest%free
regime this function will be erformed by raising
or lowering the time multile ratio in !"#$4
3*
;ENEFITS OF TMCL/;ASED
INTEREST/FREE ;AN:IN)
Following are the relevant e1tracts from the
writers boo& 7"8!3OD FO< .!0<!IAM
IA!8<8.!%F<88 '0A@IAM rinted in
February 1///4
8conomic and Financial gains to accrue from
interest%free ban&ing are many; of which several
consicuous ones are as followsF%
8. PRICES OF CONS(MER )OODS AND
NECESSITIES OF LIFE WILL FALL !
Our Prohet "uhammad saws said that 0llah
imoses dearness of necessities of life uon the
society in which interest gains revalence4
@eynes said the same thing in different words by
laying down that direct relationshi between
interest and rices is one of the most comletely
established emirical facts within the whole field
of 6uantitative economics4 81erience in Pa&istan
also shows that with continuous rise in interest
rate and its sread; rices have consistently risen
and they reach new heights every year4 :ithout
abolishing interest; consistent rise in rices
cannot be chec&ed4
In the resent system industrialists borrow large
sums of money on interest from ban&s4 Interest
36
on the borrowed money aid by the industrialists
to the ban&s is charged to the cost of
manufacture4 81%factory rices of manufactured
goods include interest and also an element of
rofit on the amount of interest4 .toc&ists;
distributors; whole%salers and even some retailers
also ta&e loans on interest for investing in their
business4 0t each stage of transfer of goods
interest charge is added to the cost of goods4
,ltimately the consumer bears the entire burden
of the interest%charge together with addition of
rofit element also on the interest charge at each
stage of the transfer of goods4
In the interest%free system there will be no
interest charge at any stage4 !herefore; other cost
factors and rofits remaining the same; consumer
rice level of manufactured goods in interest%free
system will be much lower than that in interest%
based system4 3ere is a solid e1amle4 $et the
cost of material and labour in manufacturing an
article be <s4 12224 0llowing a margin of 22D for
overheads and rofit; e1%factory rice of the
article to the stoc&ist will be <s4 12224 0llowing
the same ercentage margin for the stoc&ist the
wholesale rice to the retailer will be <s4 1((24
:ith the same ercentage margin the retailer will
sell the article to the consumer at <s4 1+2)4 If the
manufacturer; the stoc&ist and retailer are
borrowing money for their business at interest of
3+
22D; the manufacturing cost of the article
including interest will be <s4 1222; allowing the
ercentage margin of 22D e1%factory rice of the
article to the stoc&ist will be <s4 1((24 0dding
22D for interest aid by the stoc&ist and 22D for
his margin the wholesale rice to the retailer will
be <s4 22+34 0gain adding 22D for interest aid
by the retailer and 22D for his margin the retail
rice to the consumer will be <s4 2/)(4 !hus an
article at resent riced at <s4 2/)( will be
available at <s4 1+2) to the consumer after
elimination of interest4 !his reduction in rice
due to elimination of interest comes to about
(2D4 .imilarly e1tinction of interest from
business and trade will lower rices of non%
manufactured goods and other necessities of life
also4
. CONSTR(CTION COSTS AND 'O(SE
RENTS WILL FALL !
:ith the stee rise in interest rate and its sread
in the country the cost of construction and house
rents; as for other necessities of life; have also
risen tremendously4 In ma-or cities of the country
houses of moderate si5e and standard costing
about <s122;222 were rented at about <s*22 er
month in 1/6* when interest rate was /D now
cost more than <s*22;222 and fetch rent of about
<s2;*22 er month when interest rate is about
22D4 0arently construction costs and house
3)
rents and rices in general have risen in
geometric rogression along with the rise in
interest rate4
Overall effect of tremendous rise in construction
costs and conse6uent e1tremely high house rents
beyond the reach of most wage earners is that
fewer eole are building houses for renting out
and housing shortage is becoming acute day by
day4 !he reason is that most eole having
surlus money are enticed by schemes li&e
,ror'2ati and other savings schemes in which
they get about 1*D without doing anything4
:ith e1tinction of interest; surlus money will
find its way into healthy investment activities
including house building; which will cost much
less due to fall in rices of construction materials4
0vailability of more houses will result in
rovision of living accommodation to more
eole and at reasonable rents within reach of
honest living earners4
?. SA<IN)S AND ;AN: DEPOSITS WILL
INCREASE !
$ower rices of goods and reduction in house
rents will result in less e1enditure and more
savings which will of course come to the ban&s in
the form of deosits in customers accounts4 !hus
in interest%free system ban& deosits will boost4
3/
@. ;AN:S WILL O;TAIN CAPACIT* OF
INFINITE AD<ANCEMENT OF LOANS!
Interest and statutory ban& reserve are the two
rincial and essential instruments of interest%
based ban&ing system4 In the caitalist
e1loitative system caital is held to be the main
driving force for all economic activity and
interest is charged as rice of caital4 0s no rice
can -ustifiably be charged for anything which is
bountiful; artificial scarcity is in-ected in the
suly of caital by statutory reserve4 0s in
interest%free ban&ing no interest is charged as
rice of caital; there is no necessity of creating
any artificial scarcity of caital and as such
statutory ban& reserve is also done away with4
In the interest%free system loaning caacity of
ban&s will rise firstly due to increase in deosits
and secondly to a very much higher level due to
deletion of statutory ban& reserve which in-ects
artificial scarcity in the suly of caital4 'lac&%
mar&eters hoard and create artificial shortage of
goods and then e1loit the consumers by charging
unduly much higher rices on the rete1t of
scarcity in suly of goods4 In interest%based
caitalist system; interest is charged as rice of
caital and it is argued that its ayment is
necessary to attract caital which is scarce;
although caital in fact is bountiful and scarcity
in its suly is artificially in-ected into the caital
(2
mar&et by statutory ban& reserve4 @eynes in his
famous 7M8A8<0$ !38O<N wroteF G:hilst
there may be intrinsic reasons for the scarcity of
land; there is no intrinsic reason for the scarcity
of caital4 !hus we might aim in ractice at an
increase in the volume of caital until it ceases to
be scarce so that the functionless investor will no
longer receive a bonusH4 In this 6uotation
obviously bonus refers to interest and
functionless investor refers to lender of money at
interest4
Following is elaborated the role of statutory ban&
reserve in creating artificial scarcity in suly of
caital4 In the resent system with statutory ban&
reserve of 3*D loaning caacity of ban& is
limited to 24)6 multiles of total ban& deosits4 If
statutory ban& reserve is reduced to 22D; loaning
caacity of ban&s will rise to five multiles of
total deosits4 If it is reduced to 1D; the loaning
caacity of ban&s will rise to 122 multiles of
ban& deosits4 !hus in the resent system the
ban&s are constrained to limit their advances of
loans to ma1imum amount arrived at by dividing
the total deosit by the ercentage of statutory
ban& reserve4
In the interest%free system no interest will be aid
as rice of caital; therefore there will be no
necessity for creating artificial scarcity in the
(1
suly of caital4 Ao doubt statutory ban& reserve
is useful in roviding li6uidity to the ban&ing
sector in the resent system4 In the interest%free
system as already shown in the chater 7oeration
of interest%free ban&ing system li6uidity will be
arranged without any statutory ban& reserve4 !hus
there will be no constraint li&e statutory ban&
reserve on advancing of loans by ban&s and
conse6uently the ban&s in interest%free system
will obtain caacity of infinite advancement of
loans4
A. EMPLO*MENT OPPORT(NITIES
WILL RISE AND E<ER*;OD*
WILLIN) TO WOR: WILL )ET
EMPLO*MENT !
:ith caacity of infinite advancement of loans;
there will be no dearth of caital in interest%free
ban&ing system and credit will be available for all
roductive industrial and agricultural ro-ects
including labour and caital intensive ventures4
8ntrereneurs will get credit for all new ro-ects
and also for revitali5ing and moderni5ing e1isting
slac& industrial units4 :ith the re6uired caital
being available entrereneurs will go ahead with
their roduction lans which will rovide
emloyment to resently unemloyed millions
and nobody willing to wor& will remain
unemloyed4 Only those who are not willing to
wor& will remain unemloyed and such eole
(2
are not li&ely to e1ceed 24*D of the able bodied4
.o it can be concluded that elimination of interest
will lead to virtual e1tinction of unemloyment4
B. IND(STRIAL AND A)RIC(LT(RAL
PROD(CTION WILL ;E ;OOSTED !
0vailability of caital in lenty in interest%free
system; together with all the other three elements
of roduction namely s&ill; labour; and materials
already available in lenty in the country; will
give boost to industrial and agricultural
roduction4 .elf%sufficiency in food will soon be
achieved and in foreseeable future surlus food
will also be available for e1ort4 In the industrial
sector roduct costs will be reduced considerably
due to elimination of interest from the cost of
roduction4 !he cost reduction in roduction will
generate considerable e1ort otential and also
e1and the area of imort substitution which will
result in considerable reduction in imort bill4
". ;(D)ET DEFICIT WILL <ANIS' AND
DOMESTIC DE;T RETIREMENT
CAPA;ILIT* WILL ;E )ENERATED !
:ith boost in roduction and e1tinction of
unemloyment; income levels will rise and
budgetary receits will increase4 Due to
e1tinction of interest; budgetary e1enditure will
reduce considerably4 Increase in budgetary
receits and substantial reduction in e1enditure
(3
will roduce surlus budget which would enable
the government to retire domestic debt which is
ever rising higher and higher under the resent
system4 Following e1amles suort the above
contention4
0ccording to .tate 'an& of Pa&istans annual
reort for the year 1/)6%)+ the consolidated
budgetary receits for that year were <s//4**
billion; the total e1enditure was <s1**4/) billion
and the total deficit was <s*346* billion after
e1cluding <s24+) billion available as surlus of
autonomous bodies4 !he revenue receits formed
164* ercent of gross domestic roduct4 Pa&istan
economic survey 1/)(%)* gives the figure of (D
for unemloyment but adds that under%
emloyment accounts for one%fourth of the
emloyed ersons4 !his means that besides (D
who were unemloyed 2(D were under%
emloyed4 !a&ing 2(D under%emloyment to be
e6ual to 12D unemloyment; the total
unemloyment comes to 16D for the year 1/)(%
)*4 .ame figure of unemloyment can safely be
assumed to hold for the year 1/)6%)+ for which
budgetary receit and deficit are given above4 0s
already discussed; incetion of interest%free
ban&ing will reduce unemloyment to 24*D;
therefore in the year 1/)6%)+; interest%free
ban&ing could have cured 1*4*D of
unemloyment4
((
Increase in MAP resulting from 1*4*D reduction
in unemloyment can be measured by GO&unsH
law enunciated by Professor 0rthur "4O&un4
0ccording to 7O&uns law each ercentage oint
reduction in unemloyment lifts MAP by 342
ercent4 !his means that introduction of interest%
free ban&ing in the year 1/)6%)+ would have
increased the MAP by 1*4*1342L(/46 ercent4
:ith the same ta1ation level this would have
raised budgetary receits by <s//4** O 24(/6 L
<s(/43+ billion4 On the e1enditure side interest%
free ban&ing would have rovided saving of
<s1*432 billion which is the amount government
of Pa&istan aid as interest on domestic debt in
that year4 !hus gain from interest%free ban&ing in
the year 1/)6%)+ would have been <s(/43+
billion increase in budgetary receits and <s1*432
billion reduction in budgetary e1enditure4 !hese
together would have converted the budget deficit
of <s*346* billion into surlus of <s1142( billion
in the Federal budget for the year 1/)6%)+4
In the budget announced for the financial year
1//)%// total e1enditure is given as <s62643
billion and total income is given as <s*/34+
billion including e1ternal assistance of <s1(242
billion and ban& borrowings of <s(342 billion
which would in fact be debt burdens and not real
income4 !hus the budget deficit in fact would be
<s1/+46 billion and not <s1246 billion4 Aet
(*
revenue receits are estimated at <s36+41 billion4
In the economic survey for the year 1//+%/)
unemloyment ercentage is given as *43+ and
the emloyed also include all those who are
emloyed only art%time for even one hour er
wor&ing day4 It means that out of every grou of
12;222 ersons *3+ are fully unemloyed4 From
the remaining /(63 ersons it can otimistically
be assumed that *2D that is (+32 are fully
emloyed; 2*D that is 2366 are half%time
emloyed >i4e4 half%time unemloyed? and 2*D
that is 2366 are 3 6uarter time emloyed >i4e4
6uarter time unemloyed?4 2366 half%time
unemloyed means *2D of 2366 L 11)3 fully
unemloyed4 2366 one 6uarter time unemloyed
means 2*D of 2366 L */1 fully unemloyed4
!hus from a grou of 12;222 ersons fully
unemloyed are *3+ P 11)3 P */1 L 2311 L
23411D4
In the revailing circumstances of golden hand%
sha&es unemloyment is li&ely to rise but
assuming it to remain at the same level as last
year the curable unemloyment to be brought
about by interest%free ban&ing would be 23411D %
24*D >incurable? L 22461D4 0lying O&uns law
to the financial year 1//)%// increase in
budgetary receits due to incetion of interest%
free ban&ing will be <s4 22461 O 4232 O 36+41 L
<s26*46 billion4 On the e1enditure side interest
free system will rovide saving of <s16(46 billion
(6
which is the amount of interest ayable on
domestic debt4 !hus increase of <s26*46 billion
in budgetary receits and reduction of <s16(46
billion in e1enditure will convert the deficit of
<s1/+46 billion into budget surlus of <s23246
billion4
It should be 6uite clear from the above
calculations that with the incetion of interest%
free ban&ing it will become ossible to
commence retiring the domestic debt which can
then be totally cleared within a few years and
after that surlus in the budget can be used in
social welfare and develoment ro-ects4 .uch a
hay situation of our economy cannot be
visuali5ed so long as the curse of interest ersists
in our ban&ing system4
#. ;ALANCE OF PA*MENTS WILL TILT
IN O(R FA<O(R AND FOREI)N DE;T
RETIREMENT CAPA;ILIT* WILL ;E
)ENERATED !
.elf sufficiency in food combined with high
e1ort otential and reduced imort bill will
substantially imrove the countrys balance of
ayment osition4 81ort earnings during the
year 1//+%/) were around Q)4* billion4 G81orts
must foot the annual imort bill of Q1242 billionH
this is the main ob-ective of the new trade olicy
and G the devaluation aims at sulementing the
(+
Aational effort to boost e1orts to the level of Q12
billionH4
Owing to reduction in cost of roduction in the
interest%free system; all e1ortable goods
manufactured in the country could be sold at
cometitive rices in the foreign mar&ets4 :ith
the reduction in unemloyment; roduction of
e1ortable goods will also rise in the same
roortion as MAP4 0lying O&uns law to
roduction of e1ortable goods and ta&ing into
account the resent foreign e1change earning
from e1orts; increase in foreign e1change
earning in the interest%free system will be Q)4* O
22461 O 4232 L Q641* billion4 !he increase of
Q641* billion in foreign e1change earning will
convert the current negative balance of Q14*
billion into surlus of Q(46* billion without
having to devalue our currency4 !hus incetion of
interest%free ban&ing will boost foreign e1change
earning which will generate foreign debt
retirement caability and the country will soon be
able to come out of the foreign debt tra4
Foreign debt liability has consistently been rising
for the ast several decades and if we continue to
cling to the same interest%based system the same
snowball trend in debt increase will continue and
nothing will be able to sto our economy from
drowning ever dee into the morass of foreign
()
debt4 !herefore; for rotecting national liberty
and honour; it is imerative that the interest%based
system which has laden the country with
unbearable burden of foreign debt should be done
away with and relaced by interest%free !"#$%
based ban&ing system and the earlier it is done
better it will be for the nation4
%. CORR(PTION IN )RANTIN) LOANS
WILL ;E ELIMINATED AND TOTAL
LOSS IN CASE OF ;AN:R(PTC* AND
WILF(L DEFA(LT WILL ;E
A<ERTED !
0s in interest%free ban&ing system every loan will
be granted against a counter loan; discretion and
conse6uent corrution involved in granting loans
to favourites on secial concessionary terms will
be eliminated4 0ny rescheduling re6uired will
also be done on the basis of counter%loan4 In rare
cases of ban&rutcy and wilful default the
ban&ers will recover the rime loan from
collateral as at resent4 Inordinate delays involved
in recovery will be comensated by retention of
the borrowers counter loan money for a
roortionately e1tended eriod4
(/
DOMESTIC DE;T RETIREMENT IN
TMCL/;ASED INTEREST/FREE
RE)IME
IA!8<8.!%F<88 '0A@IAM rinted in Feb//
:ith the governments declaration to abolish
interest; all interest earnings will cease to be aid
with immediate effect4 $enders of money with no
ideological allegiance and for whom money is
above every thing will be shoc&ed and disleased
with the stoage of their income from interest%
bearing instruments >forbidden by 0llah?; and
they may claim that the government has no right
to go bac& on its commitment and arbitrarily sto
ayment of interest4 In this connection it would
suffice to say that our Prohet "uhammad saws
said G#ha$ a%&u$ $h' ('&()' #h& $"(u)a$'
*&+,"$"&+ #h"*h a!' +&$ (!''+$ "+ A))ah-
La#. Wh&'/'! "m(&' *&+,"$"&+ #h"*h a!'
+&$ (!''+$ "+ A))ah- La#0 $h'+ $h&'
*&+,"$"&+ #")) %' "+/a)",0 '/'+ "1 h' "m(&',
$h'' *&+,"$"&+ a hu+,!', $"m'. A))ah-
*&+,"$"&+ >$aws? a!' $!u$h a+, a!' m&!' &)",H4
!he government; by free5ing foreign currency
accounts; has already demonstrated its ower and
caability to ta&e drastic measures violating its
own commitments and solemn guarantees4 !here
*2
is no valid reason whatsoever which should deter
the government from comlying with 0llahs
$aw and the ruling of 3is <asool saws+
.toage of interest ayments will be far less
shoc&ing and much less grievous for the interest
earners than free5ing of foreign currency
accounts and comelling the account holders to
buy Dollars in the blac& mar&et for meeting their
foreign e1change needs and convert their Dollars
into <uees at a rate much lower than revalent
mar&et rate or accet interest%bearing bonds sale
and urchase of which flagrantly violate 9uraanic
in-unction4 It goes without saying that stoage of
interest will be for much nobler cause and good
of the eole and must be welcomed by all who
have any allegiance to Islam and the government
should consider it to be an honour to follow the
e1amle of our Prohet "uhammad saws; who
uon revelation of the 9uraanic in-unction to give
u interest; stoed ayment of all interest
earnings including even those which had accrued
in the ast and were outstanding for ayment4
0ccording to the 9uraanic in-unction to give u
interest; the lenders are entitled to receive their
original sums only4 !herefore whilst the lenders
will not be aid any interest; their original sums
will have to be returned to them by the
government4 0ccording to a statement of our
*1
Finance "inister; governments total domestic
debt burden is worth Q31 billion L <s1;(26
billion which is the total of the caital sums of the
lenders and interest accrued on them4 In the
absence of any definite information on the build%
u of the total debt it can be assumed that out of
<s1;(26 billion an amount of <s(26 billion is
interest and the remaining balance of <s1222
billion is the total of original sums which the
government must return to the lenders4 Incetion
of interest%free !"#$%based ban&ing system will
enable the government to retire the entire
domestic debt within a few years as e1lained
below4 !he fast deteriorating state of our
economy which may comel the government to
declare moratorium on foreign debt servicing;
unless a bail%out ac&age is doled out to us;
should move the rulers to loo& towards 0llah and
declare abolition of interest immediately4
3oefully if 1//)%// is the first financial year of
incetion of interest%free ban&ing system; the
government will re6uire <s1222 billion to meet
the demand of the lenders to return their caital
sums4 0s is shown in the chater 7economic and
financial benefits of interest%free ban&ing of this
boo&let; interest%free ban&ing will facilitate
conversion of the Federal 'udget deficit of
<s1/+46 billion into surlus of <s23246 billion4
*2
From the above mentioned surlus of <s23246
billion; <s1(+ billion will be used to retire a
ortion of the domestic debt leaving balance debt
of <s)*3 billion4 0fter settling debt of <s1(+
billion the balance from surlus of <s23246
billion will be <s)*46 billion4
For clearing the balance debt of <s)*3 billion the
government will obtain a loan of <s)*3 billion
for one year from the money mar&et by
advancing counter loan of <s)*43 billion for 12
years4 !hus in the first year of incetion of
interest%free ban&ing the government will have
cleared the entire domestic debt accumulated
during the ast several decades4 3owever the
fresh loan of <s)*3 billion ta&en by the
government will be re6uired to be aid bac& in
the ne1t financial year4 In the ne1t financial year
interest%free ban&ing is e1ected to ma&e surlus
available in the budget more than that in the
revious year; but assuming it to remain the same
<s23246 billion will be available to the
government for aying bac& the loan of <s)*3
billion ta&en by it in the last year4 Out of the
available <s23246 billion the government will use
<s163 billion in reaying art of the loan of
<s)*3 billion carried over from last year leaving
balance loan of <s6/2 billion for settlement of
which the government will ta&e a loan of <s6/2
billion from the money mar&et for one year by
*3
advancing counter loan of <s6/ billion for ten
years4 !hus the debt burden to be carried over to
third financial year will be <s6/2 billion4
In the third financial year; again from the
available surlus of <s23246 billion <s1)1 billion
will be used in reaying a art of the loan of
<s6/2 billion carried over from the last year
leaving balance loan of <s*2/ billion for
settlement of which the government will ta&e a
loan of <s*2/ billion from the money mar&et for
one year by advancing counter loan of <s*24/
billion for ten years4 !hus the debt burden to be
carried over to fourth financial year will be <s*2/
billion4
In the fourth financial year; again from the
available surlus of <s23246 billion <s222 billion
<s*2/ billion carried over from the last year
leaving balance loan of <s32/ billion for
loan of <s32/ billion from the money mar&et for
one year by advancing counter loan of <s324/
billion for ten years4 !hus the debt burden to be
carried over to fifth financial year will be <s32/
billion4
In the fifth financial year; again from the surlus
of <s23246 billion <s22( billion will be used in
*(
reaying a art of the loan of <s32/ billion
carried over from the last year leaving balance
loan of <s)* billion for settlement of which the
government will ta&e a loan of <s)* billion from
the money mar&et for one year by advancing
counter loan of <s)4* billion for ten years4 !hus
the debt burden to be carried over to si1th
financial year will be <s)* billion4
In the si1th financial year; again from the surlus
of <s23246 billion <s)* billion will be aid in full
settlement of the loan carried over from the last
year4 !his will leave surlus of <s1(+46 billion
with the government4
!hus within si1 years after incetion of interest%
free system the government will not only have
retired the entire domestic debt; but will also have
surlus of <s1(+46 billion in hand for
develoment ro-ects and <s2((46 billion in five
counter loans receivable after ten years of each
advancement4
Co-1,usio- ! From the above calculations it is
6uite clear that with the incetion of interest%free
ban&ing system we will be able to retire the entire
domestic debt and will also have sufficient funds
available for education; health; and rovision of
other basic necessities of life li&e clean drin&ing
water; construction of roads and sewage services
on which the government at resent sends very
**
little sums which do not fulfill even ten ercent of
the re6uirements4
N.;. 0s mentioned above; lenders should be aid
only their original sums and no interest4 3owever;
if the concerned authorities are adamant to ay
interest as well; the government will roceed as
follows and come out of the debt tra in ten years
instead of si1 years4
In the first year <s122 billion from the available
surlus of <s23246 billion will be aid in art
ayment of the total debt of <s1;(26 billion
leaving balance debt of <s1;326 billion and
surlus balance of <s13246 billion4 For aying
balance debt of <s1;326 billion; a loan of
<s1;326 billion will be ta&en from the money
mar&et for one year by advancing counter loan of
<s13246 billion for ten years4
In the second year <s111 billion will be aid in
art ayment of loan of <s1;326 billion carried
over from the first year leaving balance loan of
<s1;21* billion for settlement of which a loan of
<s1;21* billion will be ta&en for one year from
the money mar&et by advancing counter loan of
<s1214* billion for ten years4
In the third year <s1234( billion will be aid in
art ayment of loan of <s1;21* billion carried
over from the second year leaving balance loan of
*6
<s1;2/146 billion for settlement of which a loan
of <s1;2/146 billion will be ta&en for one year
from the money mar&et by advancing counter
loan of <s12/416 billion for ten years4
In the fourth year <s13+41billion will be aid in
art ayment of loan of <s1;2/146 billion carried
over from the third year leaving balance loan of
<s/*(4* billion for settlement of which a loan of
<s/*(4* billion will be ta&en for one year from
<s/*4(* billion for ten years4
In the fifth year <s1*243 billion will be aid in
art ayment of loan of <s/*(4* billion carried
over from the fourth year leaving balance loan of
<s)2242 billion for settlement of which a loan of
<s)2242 billion will be ta&en for one year from
<s)2422 billion for ten years4
In the si1th year <s16/43 billion will be aid in
art ayment of loan of <s)2242 billion carried
over from the fifth year leaving balance loan of
<s6324/ billion for settlement of which a loan of
<s6324/ billion will be ta&en for one year from
<s6342/ billion for ten years4
In the seventh year <s1))41 billion will be aid in
art ayment of loan of <s6324/ billion carried
*+
over from the si1th year leaving balance loan of
<s(((4) billion for settlement of which a loan of
<s(((4) billion will be ta&en for one year from
<s((4() billion for ten years4
In the eighth year <s22/ billion will be aid in
art ayment of loan of <s(((4) billion carried
over from the seventh year leaving balance loan
of <s23*4) billion for settlement of which a loan
of <s23*4) billion will be ta&en for one year from
<s234*) billion for ten years4
In the ninth year <s23241 billion will be aid in
art ayment of loan of <s23*4) billion carried
over from the eighth year leaving balance loan of
<s34+ billion for settlement of which a loan of
<s34+ billion will be ta&en for one year from the
money mar&et by advancing counter loan of
<s243+ billion for ten years4
In the tenth year; after aying the loan of <s34+
billion carried over from the ninth year; from the
available balance of <s23246 billion; amount of
<s22)4) billion will be left in hand with the
government and <s6+246* billion in nine counter
loans receivable after ten years of advancement of
each counter loan4
*)
FOREI)N DE;T RETIREMENT IN
TMCL/;ASED INTEREST/FREE
RE)IME
Pa&istans redicament of foreign debt%tra is
deicted in <esearch aer no4(( ublished by
Islamic <esearch and !raining Institute of Islamic
Develoment 'an& Eeddah as followsF%
GDesite the awareness about riba as cited above;
at the resent; Pa&istan is osed to face a real debt
crisesF all new foreign borrowings of the country
are e1hausted in servicing e1isting riba<bas'd
debts4 !otal internal and e1ternal outstanding
ublic debt of the country is e6uivalent to about
/2D of its gross domestic roduct; servicing this
debt yearly re6uires 342 billion ,. dollars;
ma&ing it the first largest e1enditure item of the
nations fiscal year 1//6 budget4 In "arch 1//6;
the governor .tate 'an& of Pa&istan warned that
his country is li&ely to enter the 7debt%traR
Pa&istan may accumulate riba arrears; and
continuously re6uest for debt rescheduling4
Pa&istan % a nation committed to eliminate riba;
during 1//6; sent more on servicing riba<bas'd
debts than even on its national defense4 !his is a
redicament of a country where a lucid definition
*/
of riba in the form of the above 6uotation has
long been &nown; where the goal of relacing the
riba<bas'd financial transactions with some
alternatives consistent with the Islamic $aw has
always remained in the national agenda and
where olitical will in this regard has always been
visible throughout the rocess of forming a
national consensus on constitutional issues4H
Our Finance "inister mentioned in "ay/) that
foreign debt liability was Q32 billion which
according to some analysts has gone u to Q32
billion by the end of Euly/)4
:hilst the government can very well sto
ayment of interest on domestic debt it cannot do
so for foreign debt and the total foreign debt of
Q32 billion which includes substantial amount of
interest will have to be aid in full4 3owever the
government can and must avoid to receive any
further foreign loans on interest4
For retiring the foreign debt no concrete stes
have so far been ta&en nor there is anything in
sight e1cet abolition of interest which can enable
the government to ta&e the country out of the
foreign debt tra4 0ccording to a statement of our
Finance "inister an amount of Q3 billion is
re6uired for servicing the total debt every year4 0s
is shown in the chater 7economic and financial
benefits of interest%free ban&ing of this boo&let;
interest%free ban&ing will facilitate conversion of
62
annual deficit of Q14* billion into surlus of Q(46
billion in our balance of ayments4
Foreign debt can be retired in one of the two
following ways deending uon whether or not
dollari5ation of our economy continues and
sufficient foreign currency is available in the
local money mar&et F%
A. FOREI)N DE;T RETIREMENT WIT'
S(FFICIENT FOREI)N C(RRENC*
A<AILA;LE IN T'E LOCAL MONE*
MAR:ET !
A8. Q14** billion from the above mentioned
available surlus of Q(46 billion will be used to
retire a ortion of the foreign debt of Q32 billion
leaving balance debt of Q324(* billion and surlus
of Q342* billion in hand4 For retiring the balance
debt of Q324(* billion the government will obtain
a loan of Q324(* billion from the money mar&et
by advancing counter loan of Q342(* billion for
ten years4 !hus within the first year of incetion
of interest%free ban&ing the government will have
cleared the entire foreign debt accumulated
during the ast several decades4 3owever the
fresh loan of Q324(* billion ta&en by the
government will be re6uired to be aid bac& in
the ne1t financial year4
61
A. In the second financial year; interest%free
ban&ing is e1ected to ma&e foreign e1change
surlus available higher than that in the first year;
but assuming it to remain the same; Q(46 billion
will be available to the government for aying
bac& the loan of Q324(* billion ta&en by it in the
first year4 Out of the available surlus of Q(46
billion the government will use Q14+2 billion in
reaying art of the loan of Q324(* billion carried
over from last year leaving balance loan of
Q2)4+3 billion for settlement of which the
government will ta&e a loan of Q2)4+3 billion
from the money mar&et for one year by
advancing counter loan of Q24)+3 billion for ten
years4
A?. In the third financial year; again from the
available surlus of Q(46 billion; Q14/1 billion
Q2)4+3 billion carried over from the last year
leaving balance loan of Q264)2 billion for
loan of Q264)2 billion from the money mar&et for
one year by advancing a counter loan of Q246)2
billion for ten years4
A@. In the fourth financial year; from the
available surlus of Q(46 billion; Q2413 billion
Q264)2 billion carried over from the last year
62
leaving balance loan of Q2(46/ billion for
loan of Q2(46/ from the money mar&et for one
year by advancing counter loan of Q24(6/ billion
for ten years4
AA. In the fifth financial year; from the
available surlus of Q(46 billion; Q242* billion
Q2(46/ billion carried over from the last year
leaving balance loan of Q224(( billion for
loan of Q224(( billion from the money mar&et for
one year by advancing counter loan of Q242((
AB. In the si1th financial year; from the
Q224(( billion carried over from the last year
leaving balance loan of Q1/4)3 billion for
loan of Q1/4)3 billion from the money mar&et for
one year by advancing counter loan of Q14/)3
A". In the seventh financial year; from the
available surlus of Q(46 billion; Q24/2 will be
used in reaying a art of the loan of Q1/4)3
billion carried over from the last year leaving
63
balance of Q164/3 billion for settlement of which
the government will ta&e a loan of Q164/3 billion
advancing counter loan of Q146/3 billion for ten
years4
A#. In the eighth financial year; from the
Q164/3 billion carried over from last year leaving
balance loan of Q134+2 billion for settlement of
which the government will ta&e loan of Q134+2
advancing counter loan of Q143+2 billion for ten
years4
A%. In the ninth financial year; from the
available surlus of Q(46 billion; Q34*) billion
Q134+2 carried over from the last year leaving
balance loan of Q12412 billion for settlement of
which the government will ta&e a loan of Q12412
billion from the money mar&et for one year by
advancing a counter loan of Q14212 billion for ten
years4
A89. In the tenth financial year; from the
available surlus of Q(46 billion; Q34/) billion
Q12412 billion carried over from the last year
6(
leaving balance loan of Q641( billion for
loan of Q641( billion from the money mar&et by
advancing counter loan of Q2461( billion for ten
years4
A88. In the eleventh financial year; from the
available surlus of Q(46 billion; Q(4(2 billion
Q641( billion carried over form the last year
leaving balance loan of Q14+2 billion for
settlement of which the government will ta&e loan
of Q14+2 billion form the money mar&et for one
year by advancing a counter loan of Q241+2
A8. In the twelfth financial year; from the
available surlus of Q(46 billion4 Q14+2 billion
will be aid in full settlement of the loan carried
over from the last year4 !his will leave balance
surlus of Q24)) billion with the government4
!hus within twelve years after incetion of
interest%free ban&ing system; the government will
not only retire the entire foreign debt; but will
also have minimum surlus of Q24)) billion in
hand and also Q2241*+ billion in eleven counter%
loans receivable after ten years of each
advancement4
6*
;. FOREI)N DE;T RETIREMENT
WIT' S(FFICIENT FOREI)N C(RRENC*
NOT A<AILA;LE IN T'E LOCAL MONE*
MAR:ET !
;8. In the first financial year of incetion of
interest%free ban&ing the government will ay the
entire available surlus of Q(46 billion in debt
retirement which will leave balance of Q2+4(
billion from the total debt of Q32 billion4
;. In the second financial year debt liability
will be Q2+4( billion lus interest ayable on it4
0ssuming rate of interest to be 12D 4a4; total
debt liability will be Q3241( billion4 0gain the
entire surlus of Q(46 billion will be aid in debt
retirement leaving balance of Q2*4*( billion4
;?. In the third financial year debt liability
including interest will be Q2)42/( billion4 0gain
after aying the entire surlus of Q(46 billion in
debt retirement balance of debt will be Q234(/(
billion4
;@. In the fourth financial year the debt
liability including interest will be 2*4)(3( billion4
0gain after aying the entire surlus of Q(46
billion in debt retirement balance of debt will be
Q2142(3( billion4
66
;A. In the fifth financial year debt liability
including interest will be Q23436++ billion4 0gain
debt retirement balance of debt will be Q1)4+6++
billion4
;B. In the si1th financial year debt liability
including interest will be Q2246((( billion4 0gain
debt retirement balance of debt will be Q1642(((
billion4
;". In the seventh financial year debt liability
including interest will be Q1+46()) billion4 0gain
debt retirement balance of debt will be Q1342())
billion4
;#. In the eighth financial year debt liability
including interest will be Q1(43*36 billion4 0gain
after aying Q(46 billion in debt retirement
balance of debt will be Q/4+*36 billion4
;%. In the ninth financial year debt liability
including interest will be Q124+2)/ billion4 0gain
balance of debt will be Q6412)/ billion4
;89. In the tenth financial year debt liability
including interest will be Q64+(1+ billion4 0gain
6+
balance debt will be Q241(1+ billion4
;88. In the eleventh financial year debt liability
including interest will be Q243**) billion4 0gain
after aying Q243**) billion in debt retirement
from the available surlus of (46 billion the
government will have in hand Q242((2 billion4
!hus within eleven years of incetion of interest%
free ban&ing system; the government will not
only have retired the entire foreign debt but will
also have available surlus foreign e1change4
6)
(ND(STIFIED ;IAS A)AINST TMCL
.ome times logic fails to revail uon re-udice
and innovative fruitful ideas are arbitrarily
re-ected to the detriment of man&ind4 !his
haened in Pa&istan with !"#$ >!ime "ultile
#ounter $oan? conceived and resented by $ate
Professor .hai&h "ahmud 0hmad who was
undoubtedly our countrys most outstanding
economist and researcher4 Perhas because he
was not a rofessional economist !"#$ did not
get any ublicity and it remained un&nown
outside Pa&istan4 0llahs laws are all enforceable
and easy to imlement in all times and climes
because 9uraan declares GALLAH ITE!S
EVERY "ACILITY "OR YO$= HE !OES OT
WAT TO *$T YO$ I !I""IC$LTIES5
>2F1)*?4 .yed 0bou%al%0ala "audoodi in his
famous boo& 7.OOD in ,rdu stressed Gint'r'st
shall ha(' to b' bann'd b0 law in on' sin/l'
startin/ st'2H4
#ouncil Of Islamic Ideology >#II? acceted the
rincile of !"#$ but unfortunately without
giving any reason did not arove of its use for
eliminating interest from the ban&ing system4
<elevant aragrah in #II reort of Eune 1/)2
reads GTim' Multi2l' Count'r Loans < $nd'r this
m'thod a bank ma0 /i(' b0 wa0 o3 int'r'st<3r''
loan a multi2l' o3 int'r'st<3r'' d'2osit b0 a ,li'nt
6/
so that th' 2rodu,t o3 th' mon'0 and tim' 3or
whi,h th' mon'0 is /i('n is th' sam' in both
,as's+ It would- how'('r- not b' ,orr',t to us'
this m'thod b0 wa0 o3 a 2'rman'nt alt'rnati('
s0st'm to th' int'r'st<bas'd s0st'm+ How'('r- in
ord'r to 2ro(id' 2'rsonal loans to 2'o2l' o3
small m'ans banks ma0 inst'ad o3 th' abo('
sti2ulations- ado2t it as a 2rin,i2l' that th'0
would 2ro(id' loans 3or 2'rsonal and non<
2rodu,ti(' 2ur2os's to thos' 2'rsons who
alr'ad0 hold a,,ounts with th'm+ In la0in/ down
th' r'2a0m'nt s,h'dul' and th' amount o3 th'
loan- how'('r- th' banks ma0 k''2 in (i'w th'
amount o3 th' d'2osit o3 th' a22li,ant 3or th'
loan and th' 2'riod o('r whi,h h' has
maintain'd his d'2osit with th' bankH4
9ueerly #II re-ected !"#$ which could
eliminate interest instantly without any disrution
in the ban&ing system and made
recommendations such as the following without
defining any secific lan of action and which
could only roduce faint hoe of elimination of
interest in some distant time F%
(i) durin/ th' 2'riod o3 about > 0'ar and ?
months that now r'mains within th' @
0'ars tim' limit s't b0 th' *r'sid'nt th'
r'st o3 th' m'asur's 3or th' 'limination o3
int'r'st 3rom th' dom'sti, transa,tions
+2
should b' tak'n in thr'' ,l'arl0 d'3in'd
2has's with s2',i3i, tim' s,h'dul';
(ii) Th' int'r'st<b'arin/ 3or'i/n loans
,hann'l'd b0 th' "'d'ral %o('rnm'nt to
th' *ro(in,ial %o('rnm'nts ma0- how'('r-
,ontinu' on th' basis o3 int'r'st till a
(iabl' alt'rnati(' ,om2atibl' with Shariah
is 3ound in r's2',t o3 borrowin/s 3rom
abroad;
(iii) %o('rnm'nt8s borrowin/s 3rom '9t'rnal
sour,'s will ha(' to b' ,ontinu'd 3or th'
tim' b'in/- on th' basis o3 int'r'st;
(iv) Th' o2'rations o3 3or'i/n bran,h's o3
*akistani banks- 3or'i/n ,urr'n,0 d'2osits
h'ld with ,omm'r,ial banks in *akistan
and ,'rtain oth'r transa,tions o3 banks
with banks abroad would ha(' to ,ontinu'
on th' basis o3 int'r'st;
(v) *ICIC8s 3or'i/n ,urr'n,0 borrowin/s ma0
,ontinu' to b' on int'r'st<basis until a
(iabl' alt'rnati(' ,on3ormin/ to Shariah
is a(ailabl'H4
Only Mod &nows what romted #II to re-ect one
readily available shariah%comliant means to
finish interest and to recommend continuation of
an act of war against 0llah and 3is <asool saws
for an indefinite eriod4 0bout twenty years have
already assed and still the awaited alternative
arrangements have not become available4
+1
Following writings show that Islamic economists
neither offer a shariah comliant alternative of
interest wor&able in the revailing low standard
of morality in the society nor do they accet
!"#$; which is neutral to moral ha5ard; as a
means to eliminate interest from the ban&ing
system4
In his boo& 7!O:0<D. 0 E,.! "OA8!0<N
.N.!8" Dr4 "4 ,mer #hara writes F%
(i) I3 th' Islami, ,omm'r,ial bank 3a,'s a
li1uidit0 ,risis and is unabl' to mak' an
alt'rnat' arran/'m'nt 3or li1uidit0- th'
,'ntral bank ,annot a33ord to r'main
indi33'r'nt+ It should a,t as l'nd'r o3 last
r'sort within th' 3ram'work su//'st'd
lat'r- but- o3 ,ours'- with a22ro2riat'
2'nalti's and warnin/s a,,om2ani'd b0 a
s2',iall0<tailor'd ,orr',ti(' 2ro/ram;
(ii) Th' m'thod o3 Tim' Multi2l' Count'r
Loans ,ould b' ada2t'd 3or small<s,al'
3inan,in/ 2arti,ularl0 within th'
3ram'work o3 ,o<o2'rati(' institutions+
"or ,omm'r,ial banks- it would b' o3
limit'd a22li,abilit0;
(iii) It would- n'('rth'l'ss- b' a mistak' to tr0
to a,hi'(' th' transition 3rom th'
,on('ntional ,a2italist mon'0 and
+2
bankin/ s0st'm now 2r'(al'nt in th'
Muslim world to th' 4ust Islami, mod'l in
on' strok' or o('r a ('r0 short 2'riod o3
tim';
(iv) Int'r'st should b' d',lar'd ill'/al-
allowin/ a ,'rtain /ra,' 2'riod o('r
whi,h it ma0 b' tol'rat'd as a n','ssar0
'(il- but a3t'r th' '92ir0 o3 whi,h it should
b' abolish'd 3rom all dom'sti,
transa,tions;
(v) All int'r'st<ori'nt'd 3inan,ial institutions
should b' ,on('rt'd /raduall0-
irr's2',ti(' o3 wh'th'r th'0 ar' dom'sti,
or 3or'i/n ori/in- into 2ro3it<sharin/
institutions;
(vi) Th' b'st wa0 to a,,om2lish th' ,on('rsion
would b' to 'nabl' all 3inan,ial
institutions to brin/ about a ,'rtain
2'r,'nta/' d',r'as' in th'ir int'r'st<bas'd
ass'ts and liabiliti's with a ,orr's2ondin/
2'r,'nta/' in,r'as' in th'ir 2ro3it<and<
loss<sharin/ ass'ts and liabiliti's until th'
total trans3ormation has tak'n 2la,' o('r
an a/r''d numb'r o3 0'ars;
(vii) All normal int'rnational transa,tions
would- how'('r- ha(' to r'main on th'
basis o3 int'r'st until th' Muslim ,ountri's
,an 3r'' th'ms'l('s 3rom th' int'r'st
'l'm'nt throu/h an '92ansion in th'ir
mutual r'lations and som' r',i2ro,al
+3
arran/'m'nt with non<Muslim ,ountri's+
This ,annot b' don' until th' ',onomi's o3
Muslim ,ountri's b',om' stron/'r and
,a2abl' o3 satis30in/ th'ir mutual n''ds+
:hilst !"#$ can easily fulfil ban&s short%term
needs of li6uidity Dr4 #hara refers unsecified
rocedures which may or may not be wor&ableS
Dr4 #hara does not give any reason as to why
!"#$ will be of limited alicability for
commercial ban&s and as to what is the logic
behind continuing an act of war against 0llah and
3is <asool saws for indefinite eriod or for
agreed number of years esecially when it can be
finished in one stro&e by relacing interest with
!"#$ in the ban&ing system4
!he contention that !"#$ can be used only for
small scale financing is unfounded and
misleading4 ,se of !"#$ for large scale
financing is demonstrated in tabular form in
0AA8O%1 which shows how a large industrial
ro-ect currently under e1ecution in .audi 0rabia
could have been financed on !"#$ basis4
Particulars of the ro-ect and financing agreement
between the Industrialist and 'an& are as
followsF%
!otal caital re6uirement L .< 13342"
+(
Owners e6uity L .< 3342"
'an& loan re6uirement L .< 12242"
$oan advanced by ban& in year 1 L .< *242"
$oan advanced by ban& in year 2 L .< *242"
<ate of interest on ban& loan L ) D 4a4
Pro-ect construction eriod L 2 years
#ommencement of roduction and
earning from ro-ect L 3years after comletion
<eayment of ban& loan and interest from ro-ect
earnings to commence in year 6 and comleted in
12 yearly installments of .< 2*42; 2(41; 224/6;
214)(;224+2; 1/462; 1)4(); 1+436; 1642(; 1*412"4
!otal amount to be aid to the ban& L Princial
12242" P interest 121462" L 221462"
!he e1ecutives of the ro-ect and the ban& who
negotiated the financing agreement; during a
discussion on !"#$ in Eeddah; as&ed the writer
as to how the above ro-ect could be financed
under !"#$4 !hereuon the writer reared
0AA8O%1 which shows how the ro-ect worth
.< 13342" could be comleted under !"#$
system with the available e6uity of .< 33" and
without having to ay any interest and without
any rofit%sharing with the finance rovider4
Following are narrated the stes to be ta&en for
financing the ro-ect under !"#$ .ystem F%
+*
*ear 8 T a loan of 664)" for * years >reayable
in year 6? is ta&en against counter%loan of 164+"
for 22 years >664) O * L 164+ O 22?
*ear T a loan of 6643" for ( years >reayable
in year 6? is ta&en against counter%loan of
1*46" for 1+ years >6643 O ( L 1*46 O 1+?
*ear B T amount of loan to be reaid to ban& L
664) P 6643 L 13141"
#ash available L >'alance from caital? P >$oans
received T 81enditure on ro-ect? P
0mount from ro-ect earning L >3342 T
164+ T 1*46? P >13341 T 133? P 2*42 L
24+ P 241 P 2*42 L 26"4
1341" aid to the ban& from 26" leaves balance
of 124/" and ban& loan of 13141 T 1341
L 122" for settlement of which loan of
122" is ta&en for 1 year against
counter%loan of 12" for 12 years4 !hus
cash balance of 24/" is carried forward
and loan of 122" for settlement in year
+4
*ear " T $oan to be reaid to the ban& L 122"
#ash available L 'alance from year 6 P amount
from ro-ect earning L 24/ P 2(41 L 2*"
12" aid to ban& from 2*" leaves balance of
13" and ban& loan of 122 T 12 L 12)" for
settlement of which loan of 12)" is ta&en for 1
+6
year against counter%loan of 12" for / years4
!hus cash balance of 1" is carried forward and
loan of 12)" for settlement in year )
*ear # T $oan to be reaid to the ban& L 12)"
#ash available L 'alance from year + P amount
from ro-ect earning L 1 P 224/6 L 234/6"
12" aid to ban& from 234/6" leaves balance of
114/6" and ban& loan of 12) T 12 L /6" for
settlement of which loan of /6" is ta&en for 1
year against counter%loan of /46" for 12 years4
!hus cash balance of 2436" is carried forward U
loan of /6" for settlement in year /
*ear % T $oan to be reaid to the ban& L /6"
#ash available L 'alance from year ) P amount
from ro-ect earning L 2436 P 214)(L2(42"
12" aid to ban& from 2(42" leaves balance of
1242" and ban& loan of /6 T 12 L )(" for
settlement of which loan of )(" is ta&en for 1
year against counter%loan of 12" for + years4
loan of )(" for settlement in year 12
*ear 89 T $oan to be reaid to the ban& L )("
#ash available L 'alance from year / P amount
from ro-ect earning L 242 P 224+2L224/2"
12" aid to ban& from 224/2" leaves balance of
)4/2" and ban& loan of )( T 12 L +2" for
settlement of which loan of +2" is ta&en for 1
++
year against counter%loan of )" for / years4 !hus
cash balance of 4/2" is carried forward U loan of
+2" for settlement in year 11
*ear 88 T $oan to be reaid to the ban& L +2"
from ro-ect earningL24/2 P 1/46L224*2"
12" aid to ban& from 224*2" leaves balance of
)4*2" and ban& loan of +2 T 12 L 62" for
settlement of which loan of 62" is ta&en for 1
year against counter%loan of 6" for 12 years4
!hus cash balance of 24*2" is carried forward U
loan of 62" for settlement in year 12
*ear 8 T $oan to be reaid to the ban& L 62"
from ro-ect earning L 24*2 P 1)4()
L21"
12" aid to ban& from 21" leaves balance of
11" and ban& loan of 62 T 12 L *2" for
settlement of which loan of *2" is ta&en for 1
year against counter%loan of 12" for * years4
loan of *2" for settlement in year 13
*ear 8? / $oan to be reaid to the ban& L *2"
+)
from ro-ect earning L 1 P 1+436 L
1)436"
12" aid to ban& from 1)436" leaves balance of
)436" and ban& loan of *2 T 12 L (2" for
settlement of which loan of (2" is ta&en for 1
year against counter%loan of )" for * years4 !hus
cash balance of 436" is carried forward U loan of
(2" for settlement in year 1(
*ear 8@ / $oan to be reaid to the ban& L (2"
from ro-ect earning L2436 P
1642(L1646"
)" aid to ban& from 1646" leaves balance of
)46" and ban& loan of (2 T ) L 32" for
settlement of which loan of 32" is ta&en for 1
year against counter%loan of )" for ( years4 !hus
cash balance of 46" is carried forward U loan of
32" for settlement in year 1*
*ear 8A T $oan to be reaid to the ban& L 32"
#ash available L 'alance from year 1( P amount
from ro-ect earning L 246 P
1*412L1*4+2"
)" aid to ban& from 1*4+2" leaves balance of
+4+2" and ban& loan of 32 T ) L 2(" for
settlement of which loan of 2(" is ta&en for 1
year against counter%loan of 6" for ( years4 !hus
+/
cash balance of 14+2" is carried forward U loan
of 2(" for settlement in year16
*ear 8B / $oan to be reaid to the ban& L 2("
#ash available L 'alance from year 1* P amounts
of counter loans given in years 6; + and /
receivable from ban& L 14+2 P 12 P 12 P12 L
3+4+2" 0fter reaying the ban& loan of 2("
cash balance left will be L 3+4+2 T 2( L
134+2"
*ear 8" / $oan to be reaid to the ban& L Ail
#ash available L balance from year 16 P amount
of counter%loan given in year 12 receivable from
ban& L 134+2 P 12 L 234+2"
*ear 8#
#ash available L 'alance from year 1+ P amounts
of counter%loans given in years ); 13 and 1(
receivable from ban& L 234+2 P /46 P ) P ) L
(/432"
*ear 8%
#ash available L 'alance from year 1) P amounts
of counter%loans given in years 2; 12 and 1*
receivable from ban& L (/432 P 1*46 P ) P 6 L
+)4/2"
)2
*ear 8
#ash available L 'alance from year 1/ P amounts
of counter%loans given in years 1 and 11
receivable from ban& L +)4/2 P 164+ P 6 L
121462"4 !his is the amount of interest which the
industrial unit has to ay to the ban& in the
interest%based system4
!he above narration shows that the industrial unit
if financed under !"#$ system would
have cost 121462" less4 $arge saving of
interest e1ense and no rofit%sharing
with finance rovider will definitely
reflect in rices of ro-ect roducts
which would be available at much
lower rices to the advantage of
common man and society as a whole4
!hus !"#$%based financing of even
large ro-ects is far suerior to
financing through interest%based loan
and through rofit%sharing4
Dr4 "4 ,mer #hara in his another boo&
7I.$0" 0AD 8#OAO"I# D8=8$OP"8A!
roclaimed immense benefit of ban on interest in
the following wordsF %
Gsin,' borrowin/ do's not ob(iat'- but rath'r
onl0 2ost2on's- th' ultimat' n''d 3or sa,ri3i,'-
th' ban on int'r'st should 2ro(' to b' a bl'ssin/
b0 r'mo(in/ th' lon/<run h'a(0 d'bt<s'r(i,in/
)1
burd'n it normall0 'ntails+ Th' ,onstraint it will
im2os' on /o('rnm'nt s2'ndin/ in th' short<run
ma0 t'nd to b' mor' than o33s't b0 th' h'alth0
dis,i2lin' it will im2os' on th' /o('rnm'nts- th'
sustain'd- st'adi'r /rowth it will /'n'rat' in th'
',onom0- th' /r'at'r ,oo2'ration it will brin/
about b'tw''n th' /o('rnm'nts and th' 2ri(at'
s',tor- and th' mu,h small'r d'bt<s'r(i,in/
burd'n it will ,r'at' in both th' dom'sti, and
'9t'rnal s',tors o3 th' ',onom0H4
3owever ignoring or neglecting the otentiality
of !"#$ as an effective relacement of interest
in one stro&e; Dr4 #hara immediately after the
above roclamation in his boo& negated the
roclamation by statingF%
GTo a(oid an '9,'ssi(' s1u''A' in th' initial
sta/'- th' /o('rnm'nts ma0 a22l0 th' 2rohibition
/raduall0 and not in on' strok'H4
It is not understood why Dr4 #hara refers to
continue an act of war against 0llah and 3is
<asool saws over a mere e1cessive s6uee5e4 3e
did not define the mechanics of the rocess of
gradual rohibition of interest and also where to
start4
!he 'lue Print Of Islamic Financial .ystem
Including .trategy For 8limination Of Riba
ublished by International Institute Of Islamic
)2
8conomics; International Islamic ,niversity;
Islamabad includes short comment on !"#$F
GOn' ma0 ar/u' that TMCL instrum'nt o33'rs an
in/'nious solution to th' 2robl'ms o3 Riba-
/harar and ha(in/ two mutuall0 '9,lusi('
,onditions in on' ,ontra,t+ #ut its (iabilit0 is
1u'stionabl' 3or s'('ral r'asons+ Som' o3 th's'
ar' as 3ollows+ Count'r loans would b' liabilit0
o3 th' banks+ Th'r'3or'- whil' th' sum /'n'rat'd
mi/ht b' us'd to m''t th'ir o2'ratin/ '92'ns's it
would not b' distributabl' as 2ro3its amon/ th'ir
shar' hold'rs or d'2ositors who 2ro(id' 3unds on
2artn'rshi2 basis+ This will ,om2'l th' banks to
turn to tradin/- l'asin/ and oth'r 2ro3itabl'
o2tions+ It is also 2ossibl' that ,li'nts ma0 us'
loans 3rom banks- wh'th'r dir',tl0 or indir',tl0-
to /i('- th' ,ount'r<loans+ This- in turn- ,asts
3urth'r doubts on th' us'3uln'ss o3 th' TMCL
o2tion+ Last but not th' l'ast- a r',ours' to
TMCL is not ad(isabl' b',aus' th' 'nsuin/ ,r'dit
'92ansion is lik'l0 to 3u'l in3lation+H
Obviously the above cursory remar&s on !"#$
have been made without ta&ing into account the
following imortant oints4 !he sum generated by
counter%loans will be invested in long%term
rofitable business4 !he rofits earned by the
ban&s will be shared with the deositors in
investment accounts4 !here is no harm in the
ban&s turning to Shariah%comliant trading
)3
modes as is done by all Islamic ban&s4 8very loan
will be advanced against collateral and will have
to be returned on due date4 !here is no reason
why any sensible erson will use the loan from
ban& to give counter%loans for further loans
instead of utili5ing it in meeting his business
re6uirements4 #redit e1ansion will be controlled
by raising or lowering the time%multile ratio in
!"#$ -ust as it is controlled in the resent
system by raising or lowering interest rate4
In the chater on strategy for elimination of Riba
the 'lue Print states GTh' mo(' towards Riba<
3r'' bankin/ s0st'm ma0 start in 'arn'st with th'
'stablishm'nt o3 on' mod'l Islami, bran,h 'a,h
b0 all '9istin/ banks+ This '92'ri'n,' ma0 b'
r'2li,at'd b0 th'm and a22li'd to th'ir oth'r
bran,h's su,h that all bran,h's o3 a bank and-
th'r'b0- th' 'ntir' bankin/ s0st'm /'ts ,on('rt'd
into th' Islami, mod' in a22ro9imat'l0 on' and a
hal3 0'ars+H; GTh' t'rms o3 r'3'r'n,' o3 th' abo('
Coordination Committ'' should b'B i+ to ,halk
out th' blu' 2rint and do,um'nts 3or th' mod'l
bran,h's+ ii+ To r',omm'nd n','ssar0 a,tion to
th' ,on,'rn'd 1uart'rs- su,h as th' Stat' #ank
and th' Ministr0 o3 "inan,'+H
.trangely enough the authors of the blue rint
re-ect a definite one ste action lan of relacing
interest instantly by !"#$ and recommend a
)(
lan blue rint of which still remains to be
chal&ed out and imlementation of which would
tentatively ta&e one and a half years and no body
&nows how many more years it may ta&e to
eliminate interest comletely from the ban&ing
system4
It would be aroriate to rove; by definite
e1amle; consicuous sueriority of !"#$%
based financing over the roosition made in
III8s bluerint which statesF%
G134(41 Asset I2a!ah Se1urities i-4o,4i-0 a
fi-a-1ia, i-termediar3 >0I.%IFI?4
.uose the "inistry of Defence needs a training
field sread over a 12%acre iece of land in central
locationV 4
13.4.2 !he "inistry may contact an
Islamic ban& to reare an issue of asset
I4arah securities that allows the "inistry
to ac6uire the needed land4
13.4.3 !he line of action on the ban&s side
can be as followsF
i. It may initially buy the lot for; say; <s4 12 "
in its own name4
ii. It may rent the lot to the "inistry for; say;
<s4 /22;222 er year4
iii. !he I4arah contract with the "inistry may
have a eriod of; say; 12 years after which it
may be renewed for 12 years at a time4
)*
iv. !he ban& may issue; for e1amle; 1;222
asset I4arah securities with each security
reresenting 1;222
th
of the lot and a claim to
<s4 /22 a year >L1;222
th
of <s4 /22;222? as
rent4
v. !he ban& may claim an issuance
commission of; say; *Das a remium above
the urchase rice of land and; hence; sell
the securities at <s4 12;*22 eachH4
In the above mode of financing the government
will never own the defense facility and will have
to continue to incur recurring e1ense of <s4
24/" as annual rent4 In the first 12 years the
government will have aid <s4 124)" which
e1ceeds the actual cost of the facility by 24)"4
,nder !"#$ system of financing government
will obtain a loan of <s4 124)" for 1 year against
counter loan of <s4 24/" advanced to the ban&
for 12 years4 From this loan the government will
send <s4 1242" to ac6uire the facility as state
roerty4 #alculations in 0AA8O 2 show that
under !"#$ system government will clear the
ban& loan within 22 years and aart from having
a surlus balance of <s4 242" will have
receivable counter%loan amounts from the ban&
<s4 24+ P 24* P 24+ P 24* P 24( P 24* P 24* P 24* P
24* P 24( P 24( P 24( L 642"4 0s the government
will own the facility it will ermanently save <s4
24/" annually4 If the ro-ect is financed under
)6
0sset I4arah securities system as recommended in
III8s bluerint the government will remain a
tenant ermanently incurring annual e1ense of
<s4 24/" as rent of the facility4 Is it -ot sad,3
asto-ishi-0 that the +,ue2ri-t re5e1ts TMCL
a-d 2refers Asset I2a!ah se1urities s3stemE
!ragic result of the ersistent bias against !"#$
is that about 222 Islamic ban&s have mobili5ed
"uslim $mmah8s financial resources of billions
of Dollars and are running rofitably but they are
unable to ward off interest which is the foremost
fundamental re6uirement of Islamic financial
system4 Aothing can be so tragic and ridiculous
as Islamic ban&s indulging in interest%based
transactions4 0gainst Pa&istans urgent
re6uirement of funds in 1//) Islamic
Develoment 'an& Eeddah together with the large
Islamic ban&ing community could do no better
than offering a loan on interest and that too at *D
above $I'O<S
3on4 Eustice "uhammad !a6i ,smani is
chairmanImember Shariah .uervisory 'oards of
a do5en Islamic ban&s4 In his recent boo&
7IA!<OD,#!IOA !O I.$0"I# FIA0A#8 he
writes GTh' ,as' o3 Islami, bankin/ ,annot b'
ad(an,'d unl'ss a stron/ s0st'm o3 int'r<bank
transa,tions bas'd on Islami, 2rin,i2l's is
d'('lo2'd+ Th' la,k o3 su,h a s0st'm 3or,'s th'
)+
Islami, banks to turn to th' ,on('ntional banks
3or th'ir short<t'rm n''ds o3 li1uidit0 whi,h th'
,on('ntional banks do not 2ro(id' without 'ith'r
an o2'n or ,amou3la/'d int'r'stH4
In the seminar roceedings no43/ on 7Islamic
Financial Instruments ublished by ID' Islamic
<esearch and !raining Institute is stated G#ut
what i3 th' /o('rnm'nt n''ds ,ash &to 2a0
salari's or bu0 s'r(i,'s) and n''ds it now+ Th'
o2tions a(ailabl'- so 3ar- is borrowin/ 3rom th'
2ubli, or th' bankin/ s',tor at int'r'st+ It is no
a,,id'nt that whil' /r'at ad(an,'s had b''n
takin/ 2la,' in th' IslamiAation o3 th' 2ri(at'
3inan,ial transa,tions in man0 Muslim ,ountri's-
('r0 littl' has b''n don' in th' 2ubli, s',tor+
Almost all Islami, /o('rnm'nts borrow on
int'r'stH4 In another ID' I<!I ublication
7#30$$8AM8. F0#IAM I.$0"I#
'0A@IAM is stated G:hil' Islami, banks and
in('stm'nt 3unds ha(' so 3ar mobiliA'd hu/'
3inan,ial r'sour,'s- a lar/' 2art o3 th's'
r'sour,'s ha(' 3ound its wa0 into w'st'rn
3inan,ial mark'tsH4
0dotion of !"#$ as loaning instrument by
Islamic ban&s will bring the following benefits to
Islamic ban&s and the "uslim ummahR
8. It .i,, fa1i,itate i-ter/+a-k i-terest/free ,oa-
tra-sa1tio-s.
))
. It .i,, fa1i,itate setti-0 u2 of a Ce-tra,
De2ositor3 for mo+i,i7i-0 sur2,us fu-ds of
Is,ami1 +a-ks a-d 0o4er-me-ts o- TMCL
+asis a-d ad4a-1i-0 to them i- times of -eed
TMCL/+ased i-terest/free ,oa-s.
?. It .i,, fa1i,itate uti,i7atio- of the fi-a-1ia,
resour1es of the Mus,im ummah i- de4e,o2i-0
Mus,im 1ou-tries throu0h the Ce-tra,
De2ositor3$ i-stead of +ei-0 di4erted to
.ester- fi-a-1ia, markets.
(2shot of the a+o4e dis1ussio- is that Is,ami1
e1o-omists a-d +a-kers .ith 2rofou-d se-se
of ur0e-13 a-d dedi1atio- shou,d stri4e for
i-1e2tio- of TMCL as ,oa-i-0 i-strume-t to
re2,a1e i-terest i- the +a-ki-0 s3stem. It is
i-deed the e-tire Mus,im Ummah- 1ru1ia,
-eed of the hour.
)/
SOL(TIONS OF PRO;LEMS RAISED
IN )O<ERNMENT=S PETITION OF
8?//%% TO FEDERAL S'ARIAT CO(RT
!his boo&let contains a fully satisfactory rely to
the Movernments etition of 13%2%// to Federal
Shariat #ourt on the 6uestion of interest about
which the same court gave on 1(%11%/1 a fully
documented; thoroughly argued; unanimous and
authoritative decision after intensive hearings on
etitions against interest; defended by the
Movernment through legal talent of highest
calibre available in the country4
It is not li&ely that the Federal Shariat #ourt will
agree to hear arguments and oen a debate all
over again on an issue already thoroughly
e1amined and comrehensively ad-udicated uon
and it is inconceivable that the court will ma&e
any amendment in its authoritative decision on
which no ob-ection has ever been raised by any
Islamic scholar or modern economist and which
remained unimlemented only because the
Movernment never ordered the ban&ing
organi5ations to eliminate interest from the
ban&ing system4
/2
#ourts normal function is to interret laws and
ass -udgments on validity of laws and decide
disutes and not to ma&e laws or design systems
and as such the re6uest in the etition for
roosing a model for economic system is an
e1ercise in futility4 3owever; this re6uest reveals
Movernments concern about the harmful effects
of interest on the society and economy and the
urgent need for starting interest%free ban&ing
system in the country4 Fortunately; this boo&let is
now available which demonstrates a racticable
method for starting interest%free ban&ing system
immediately4 3ence; there is no necessity to wait
for a decision on the etition as there is a ris& of
long drawn roceedings to ensue which will
unnecessarily delay our submitting to the :ill of
0llah and conse6uent result of fruitful gains
therefrom4
For ready reference of the Prime "inister and
those Movernment decision ma&ers who are
genuinely interested in starting the rocess of
alleviating financial miseries of the eole and
ta&ing the country out of debt%tra without any
further delay; gist of each issue raised in the
above etition is reroduced hereunder in italics
with corresonding rely underneath4
/1
C+> Con3li,tin/ 4ud/m'nts- ,ontrar0 (i'w in
'arli'r 4ud/m'nt o3 Sindh Hi/h Court &*L! >D?D
6ara,hi @EF)
For the first time in Pa&istan history the 6uestion
of interest came u for thorough e1amination and
ad-udication before the Federal Shariat #ourt in
early 1//2; and after the authoritative decision of
1(%11%/1 not a single differing oinion has so far
come to light what to say of conflicting -udgment4
.indh 3igh #ourts -udgment of 1/)/ came u
before Federal Shariat #ourt during the
roceedings of 1//2%1//14 !he court after
detailed e1amination of the .indh 3igh #ourts
-udgment dissented with it to the e1tent of
allowing an additional amount on loan based on
inde1ation on account of inflation4
@+> Th' %o('rnm'nt b'in/ ,o/niAant o3 its
r's2onsibiliti's 3or 'nsurin/ a smooth and
s'aml'ss transition to an ',onom0 bas'd on
Islami, 2rin,i2l's is d'sirous o3 takin/ '33',ti('
and imm'diat' st'2s+
!his nobly worded desire needs translation into
action which is to order immediate elimination of
interest which the ban&ing organi5ations can
e1ecute without much ado by relacing interest
with !"#$ >!ime "ultile #ounter $oan? as
e1lained in the chater on GOeration Of
Interest%Free 'an&ing .ystemH of this boo&let4 If
the Movernment decision ma&ers have any
/2
substantial ob-ection or difficulty in
imlementing the roosal the writer shall travel
at any time at short notice to meet the Prime
"inister or any of his aointees anywhere for a
discussion at his own e1ense4 !he writer also
volunteers his services to the Movernment;
without any status or remuneration; for any wor&
re6uired to be done for eliminating interest from
the ban&ing system4
F+> It is th' will o3 th' 2'o2l' o3 *akistan to
'stablish an ord'r wh'r'in Muslims shall b'
'nabl'd to ord'r th'ir li('s in indi(idual and
,oll',ti(' s2h'r's in a,,ordan,' with th'
t'a,hin/s and r'1uir'm'nts o3 Islam as s't out in
th' Hol0 Quraan and Sunnah+
!he first and foremost re6uirement for fulfilling
this ob-ective is for the Movernment to finish the
on%going war with 0llah and 3is <asool saws by
eliminating interest4
G+> This Honourabl' ,ourt ma0 b' 2l'as'd to la0
down an o('rar,hin/ s,h'ma with ,l'arl0
d'lin'at'd 3'atur's 2ro(idin/ 3or a
,om2r'h'nsi(' solution to th' 2robl'm o3
,r'atin/ an ',onom0 bas'd on th' 'limination o3
Riba+
It is not the function of Federal Shariat #ourt to
lay down schema which; as shown below; is
unnecessary and even harmful4
/3
It is well%&nown what is forbidden in Islam and
whatever is not secifically forbidden can be
racticed4 'eyond certain GdosH and GdontsH
there are no constraints in Islam and it grants
comlete freedom of action and encourages
cometition which is necessary for rogress and
develoment and as such it will be harmful for
the economy and unfair to individuals and
enterrises to secify any articular scheme for
all business houses and ban&s4 ,on elimination
of interest insatiable lust for worldly riches
created by it will die down and economic system
will begin to ta&e Islamic shae automatically4
.olution of the economic roblems lies in
elimination of interest for which this boo&let
rovides sufficient guidance4
G+>+C o sustain'd r's'ar,h or s0st'mati,
a22li,ation o3 mind+
It is the duty of the Movernment to ta&e action in
this connection4
G+>+@ Im2a,t o3 in3lation on th' ri/hts o3
borrow'rs and l'nd'rs+
0ccording to the 3oly 9uraan and Sunnah any
amount charged by the lender over and above the
rincial amount of loan on any account is riba4
Interest is the main cause of inflation and in
interest%free system there will be no significant
imact of inflation4 Islamic rinciles are simle
/(
to ut into ractice and are disute%averse4
!herefore; the simle and clear Islamic $aw is
that whatever amount is borrowed same amount
has to be returned and there is no mention of the
value of loan and also no rovision for ma&ing
any change on any account whatsoever4 !here is
no e1act unit of measure for calculating the value
of money at different times4 !herefore the simle
way to avoid any disute is to receive bac& only
whatever is given in loan4
!his issue was brought u in defense of interest
by its advocates before the Federal Shariat #ourt
during 1//2%/14 It was thoroughly e1amined
argued and settled4 It is not understood why this
issue is again being raised4 0arently the authors
of the etition have not cared to study the
contents of the momentous -udgment of the
Federal Shariat #ourt given in Aovember 1//14
G+>+F Ri/ht o3 banks to l'(0 s'r(i,' ,har/'s+
!here will be no service charge on loans in
!"#$%based interest%free ban&ing system4
G+>+G R'turns to banks in 2ro3it sharin/-
unsatis3a,tor0 '92'ri'n,' o3 2ro3it sharin/
a/r''m'nts- 3als' and ina,,urat' books o3
a,,ounts b0 ,om2ani's showin/ loss in 2ro3it<
sharin/ transa,tions- in4usti,' to small
d'2ositors+
/*
In !"#$%based ban&ing system ban&s will issue
loans on the basis of !"#$ against collateral and
they will not be under any comulsion to rovide
finance on rofit%sharing basis4 3owever; the
ban&s will be free to enter into rofit%sharing
agreements with comanies of their choice4 In
their own interest and in the interest of their
deositors the ban&s themselves will ta&e care to
enter into rofit%sharing agreements with only
reutable organi5ations who maintain transarent
accounts4
0s regards rofit%sharing ratio; it will be left to
the mar&et forces and cometition4 "ar&et
economy does not encourage unnecessary
constraints and encourages oen cometition4 In
!"#$%based interest%free ban&ing system there
will be two tyes of deosits i4e4 demand deosits
and investment deosits4 On demand deosits
ban& will not give any rofit but return of full
amount as and when demanded will be
guaranteed4 On investment deosits ban&s will
give a ortion of rofit earned by them to the
account holders4 If the ban& incurs loss on
investment then the deositors will also share the
loss4 In the interest of their business and in view
of cometition from other ban&s the ban&s will
give a fair share to the investment deosit account
holders from the rofits earned by the ban&4
/6
Otherwise the ban& will run the ris& of deosits
being shifted to other ban&s4
0s regards maintenance of false accounts by
comanies; the Movernment can and must ta&e
stern administrative measures and unish the
culrits irresective of their olitical affiliation so
as to sto lea&age of ta1es and loss of revenue4
Federal Shariat #ourt can rovide no hel to the
Movernment as it is a matter of good governance
which the Movernment itself must rovide4
G+>+H &') Laws to 2r'('nt mon'0<l'nd'rs ,har/in/
usurious rat's o3 int'r'st 3rom 2'rsons in w'ak
bar/ainin/ 2osition- w'r' int'nd'd to 2r'('nt
'92loitation+
G+>+H &3) L'nd'rs ar' now middl' ,lass
indi(iduals who d'2osit th'ir sa(in/s 3or th'ir
3utur' n''ds- wh'r'as bulk o3 borrowin/ 3rom
banks is don' b0 ,or2orat' or busin'ss 'ntiti's
som' o3 whi,h ar' ('r0 lar/' or ('r0 w'alth0+
!hese fallacious contentions in favour of ban&ing
interest ut forward by advocates of interest have
been reelled time and again by eminent "uslim
scholars and economists4 0llamah I6bal made a
secific reference to modern ban&s in one of his
famous verses condemning interest4 0ccording to
9uraan and Sunnah any amount >big or small? in
e1cess of the original amount of loan >advanced
/+
for any urose % consumtion; trade; industry or
agriculture? charged from any one >rich or oor?
is riba and strictly rohibited4 <aising of such
settled issues does not behove a government
see&ing ways and means to eliminate interest
from the economy in abidance of recets of
9uraan and Sunnah4
G+>+H &/) Traditional Islami, m'thods o3
3inan,in/ su,h as Mudaraba or Musharaka
arran/'m'nts ma0 sim2l0 l'ad to d'2ri(ation o3
th' sa(in/s o3 th' d'2ositors+ Lar/' and w'alth0
,om2ani's will r','i(' int'r'st<3r'' loans whi,h
th'0 ma0 or ma0 not r'2a0+
In !"#$%based interest%free ban&ing system
ban&s will advance loans on !"#$ basis against
collateral and they will not be under any
comulsion to enter into rofit%sharing
agreements as already e1lained under item G+>+G4
0s regards the roblem of non%ayment of loans;
it is not secifically related to interest%free
ban&ing4 In the resent interest%based ban&ing
system also billions of <uees have not been
reaid4 .olution of this roblem is the duty of the
Movernment and can be achieved only through
good governance4 Federal Shariat #ourt cannot
hel the Movernment in this olitically originated
roblem solution of which re6uires stern
administrative measures by the Movernment4
3owever; uon elimination of interest insatiable
/)
lust for worldly riches created by interest will die
down and instances of non%reayment of loans in
!"#$ interest%free ban&ing system; hoefully;
will be rare4
G+>+H &h) *rodu,ti(' utiliAation o3 d'2osits-
dis,o('r0 o3 2ro3itabl' a('nu's o3 in('stm'nt-
risk0 in('stm'nts to b' 's,h'w'd- l'ndin/ o3
banks to b' bias'd in 3a(our o3 ,ons'r(atism-
l'ndin/ 'ntails risks- ,om2'nsation 3or th' risks
in,urr'd b0 banks+
Aot only ban&ing but all businesses involve ris&s
and it is their e1clusive concern to manage their
businesses rudently4 :here fraud or other
misconduct comes into lay it becomes the duty
of the Movernment to ta&e stern administrative
measures and unish the culrits4 It is by no
means the function of Federal Shariat #ourt to
devise ways and means to avoid ris&s and losses
in ban&ing business4 "oreover these roblems
e1ist in the resent system also and it is not
understood why these are raised in resect of
interest%free system secifically4
G+>+I #orrow'rs should not b' saddl'd with
'9orbitant ,har/'s im2os'd b0 banks+
In !"#$%based interest%free system there will be
no service charges on loans imosed by the
ban&s4
//
G+>+I &a) Loan on 2ro3it<sharin/ ma0 'nd u2 in
2a0in/ mor' to th' bank- man0 ,om2ani's do not
maintain ,orr',t books o3 a,,ounts+
In !"#$%based interest%free system; as oosed
to rofit%sharing based system; ban&s will not be
under any comulsion to enter into rofit%sharing
agreements4
G+>+I &b) Hi/h ,ost o3 bank borrowin/s ad('rs'l0
'33',ts /rowth o3 th' ',onom0- is lik'l0 to l'ad to
*akistani manu3a,tur'rs b'in/ 2ri,'d out o3
3or'i/n mark'ts- int'rnall0 it l'ads to 2ri,'
in,r'as's and hi/h'r rat' o3 in3lation and
'9t'rnall0 it l'ads to 3all in '92orts and a /r'at'r
d'2'nd'n,' on 3or'i/n loans at hi/h rat's o3
int'r'st and ,ons'1u'ntial trans3'r o3 ',onomi,
so('r'i/nt0 in 3a(our o3 3or'i/n ,ountri's+
Aothing can be as unatriotic and disgusting as to
be guilty of la1ity in discarding interest even after
reali5ing its devastating grievous effects listed
above; and continue -eoardi5ing the countrys
economic sovereignty4 0ny more delay in
eliminating interest may ma&e it well nigh
imossible to save our economic sovereignty and
indeendence from foreign clutches4
G+>+I &,) Via m'dia 3or r',o('r0 o3 si,k industrial
units+
Owners of sic& industries got away with looting
of ublic money due to their olitical influence4
122
!hey are living in lu1ury and have used share%
holders money and loans from nationali5ed
ban&s in building big ban& balances and buying
roerty and other valuable assets4 !he solution
of the roblem does not lie in uming more
ublic money into the sic& units but it lies in
recovering by force the looted wealth from the
owners ersonal assets which are no secret and
which are often bra5enly e1hibited in ublic4
.tern action must be ta&en against all of them
irresective of their olitical affiliations4 Aobody
should be ermitted to en-oy looted wealth4
G+C What is r'1uir'd is a r'3orm o3 th' bankin/
s0st'm and not its d'stru,tion in th' nam' o3
int'r'st<3r'' bankin/ s0st'm+ What is r'1uir'd is
a d'tail'd ,ar'3ul and s0st'mati, a22li,ation o3
mind to r'stru,tur' it in th' li/ht o3 th'
in4un,tions o3 Islam in su,h a mann'r that it
l'ads to an im2ro('m'nt in '33i,i'n,0 and not a
d'(astation o3 th' ',onom0+
!he roosal of relacing interest by !"#$ ut
forward in this boo&let is so much in line with the
above re6uirements that this boo&let can be held
to be tailor made for meeting the above
re6uirements fully and effectively4 !he roosal
calls for only giving u interest and in-ecting
!"#$ as debt financing instrument in the
ban&ing system4 Ao other means is yet &nown
whereby interest%based system can be so
121
smoothly converted into interest%free system and
this can ta&e lace in no time without much ado4
Aow there should be no e1cuse for any body to
delay this transformation any longer4
G+@ o mod'rn ',onom0 ,an 3un,tion without
s',ur' and (ibrant bankin/ s',tor+
!he above contention is true and it is also true
that with the incetion of !"#$ as substitute of
interest the ban&ing sector will not only become
vibrant and secure but will also roduce siritual;
ideological; moral; social; economic and financial
benefits as deicted in various chaters of this
boo&let4
G+F #ankin/ s0st'm is th' ,onduit throu/h whi,h
mon'0 3lows 3or in('stm'nt and '92ort and
im2orts+ It is not 2ossibl' in th' mod'rn world 3or
an0 ,ountr0 to subsist as an island o3 isolation+ I3
th' ,ountr0 is to a,t as on' o3 th' 3la/ b'ar'rs o3
an Islami, r'nas,'n,' it ,annot a33ord to la/
b'hind in ',onomi, 2ro/r'ss and d'('lo2m'nt+
!he above contentions are very true but it is also
true that the ban&ing system does not have to be
interest%based which has led us into debt%tra and
brought our credit rating down to an insulting low
level which is far worse than living in isolation
with self%resect not in-ured by dictation of
lenders4 Flag bearer we are; but on the wrong side
of the war front4 :e are not 6ualified even to
122
enter any Islamic team for which we must discard
interest and only then we can asire to achieve
economic indeendence and roserity and
conse6uently lace of resect in the world4
!oo much time has already been wasted and to
avoid further damage it is necessary to imlement
Federal Shariat #ourts order of 1(%11%/1
immediately instead of waiting for an outcome of
the resent etition and letting; in the mean time;
the countrys economy to worsen further and
become more deendent on foreign loans which
increase the debt burden and rovide only short
breathing sace at high rice of assing of our
rofitable strategic national assets li&e P!#$
ermanently into foreign hands; and no real
assistance for economic recovery4
Due to non%imlementation of Federal Shariat
#ourts order we have lagged far behind in
economic rogress during the ast seven years4 In
order to avoid lagging further behind it is
necessary to imlement the above order
immediately4
H+> Subsistin/ ,ontra,ts 'nt'r'd into with 3or'i/n
or dom'sti, 'ntiti's+
It is not clear what the etition re6uires from the
Federal Shariat #ourt by raising this oint4 If the
intention is to in6uire what should be done about
123
outstanding interest%based loans; then comlete
satisfactory answer of this 6uestion is given in
chaters on Gdomestic debt retirement after
incetion of interest%free ban&ing systemH and
Gforeign debt retirement after incetion of
interest%free ban&ing systemH of this boo&let4
I+> Cru,ial and ,'ntral rol' o3 th' bankin/
s0st'm not r'aliA'd+ This honourabl' ,ourt
should 'mbark on a d'tail'd and '9hausti('
'9'r,is' to authoritati('l0 la0 down th' sali'nt
3'atur's o3 an Islami, ',onom0+ A s0st'm whi,h
,on3orms to th' s2irit and l'tt'r o3 Islami,
2ro(isions should b' s2'll'd out in t'rms o3
whi,h th' bankin/ s0st'm ,an 3un,tion '33i,i'ntl0
and 2rodu,ti('l0 3or th' b'n'3it o3 th' 2'o2l' o3
*akistan+ "'atur's whi,h ar' Islami, must b'
isolat'd and s'2arat'd 3rom thos' whi,h ar' un<
Islami,+
Ordering to eliminate interest from the ban&ing
system does not at all mean non%reali5ation of the
crucial and central role of ban&ing system which
does not necessarily have to be based on interest4
0fter the Federal Shariat #ourt had given
e1haustive -udgment of 1(%11%/1; it was the duty
of the Movernment to embar& on detailed and
e1haustive e1ercise to find a method to eliminate
interest from the ban&ing system4 Aow after more
than seven years it is not right to say Gthe
12(
honourable court should >B? embar& on detailed
and e1haustive e1ercise444H because the function
of Federal Shariat #ourt is to e1amine and ass
-udgments on secific laws and disutes and not
to design systems4 If the 6uest is for a suitable
method to eliminate interest from the ban&ing
system; then the re6uirement is fully met with by
this boo&let4 If the concerned authority has any
doubt about the viability of the roosal given in
the boo&let; the writer will be only too glad to
have a meaningful discussion for which he will
travel at his own e1ense4
Interest%free ban&ing system is the foundation for
Islamic economic system and laying of this
foundation is the most urgent need of the hour
and must be accomlished immediately4
3owever; to wor& out details of a comlete
Islamic economic system for the country is a big
tas& and the Movernment should set u a
commission of Islamic scholars and economists
of integrity to reare recommendations on
imortant issues li&e land reforms; e6uitable
ta1ation; collection of revenues; roer Aakat
system >resent system is an insult to the Islamic
concet of Aakat?; rudent e1enditure of
revenues; stoage of e1enditure on lu1urious
amenities for Movernment e1ecutives and
arliamentarians; rovision of basic necessities of
life for all including emloyment; housing;
12*
education; and health services etc4 It may ta&e
6uite some time in the rearation of these
recommendations but elimination of interest from
the ban&ing system is not deendent on them and
must on no account be delayed any further4
?+> E9istin/ s0st'm ma0 b' d'stro0'd without
,r'atin/ an alt'rnati(' s0st'm+ This ,an onl0 b' a
r',i2' 3or ',onomi, and so,ial disast'r+
Incetion of !"#$ as substitute of interest in the
e1isting system will be smoothest ossible
transition of interest%based un%Islamic system into
interest%free Islamic ban&ing system4 !he e1isting
interest%based ban&ing system has already roved
to be a recie for social and economic disaster
and there is no -ustification at all to let it continue
any longer4
D+> Obli/ation in '9,'ss o3 $SJ HE billion
&3or'i/n d'bt in '9,'ss o3 $SJ @F billion-
dom'sti, d'bt in '9,'ss o3 RS >CEE billion) d'bt
s'r(i,in/ runnin/ into billions o3 dollars
annuall0+ With a d',ision not to 2a0 int'r'st- th'
,ountr0 ma0 b',om' a d'3ault'r with 2ot'ntiall0
'9tr'm'l0 s'rious im2li,ations+
!he miserable situation of the economy as
deicted is the result of e1cessive imort of
lu1uries far in e1cess of the value of e1orts;
e1cessive budget deficits resulting from sending
far in e1cess of the revenues; and indiscriminate
126
borrowing on interest4 !he situation can be
imroved only by adoting the cult of
ine1ensive simle living within the available
honest means of income at individual and
national level; the e1amle of which must be set
by the ruling elite4
For ta&ing the country out of the debt tra it is
absolutely essential to convert the e1isting system
into !"#$%based interest%free ban&ing system4
!he two chaters of this boo&let on domestic and
foreign debt retirement demonstrate with
mathematical calculations how we can meet the
obligations of reaying our debts in full and
roceed on the ath of rogress and develoment4
0nybody in authority who re-ects the writers
roosal must give a well%defined alternative and
e1lain how the country can be ulled out of the
debt%tra4 If such an alternative is not available;
which certainly is the case; the Movernment
should have no hesitation to order immediate
imlementation of the writers roosal4
>E+> Im2ortan,' o3 honourin/ ,ontra,tual
sti2ulation+
0s is clear from the answer to the issue D+> the
contractual stiulations will be fully honoured
under the rocedures laid down in this boo&let for
domestic and foreign debt retirement4
12+
>>+> &a) A smooth and non<disru2ti(' transition
to an ',onom0 bas'd on th' 2rin,i2l' o3 Ehsan
and Adl whi,h is 3r'' 3rom th' taint o3 Riba+
0dotion of the writers roosal to relace
interest with !"#$ will result in a smooth and
non%disrutive transition of interest%based un%
Islamic ban&ing system to interest%free Islamic
ban&ing system which is a re%re6uisite for
structuring comlete Islamic economic system
based on the rinciles of Ehsan and Adl; on
which the writer has already commented in
answer to issue I+>4 If and when interest%free
ban&ing system is established in the country the
writer will offer his humble services to the
Movernment; without any status or remuneration;
for any wor& re6uired to be done in rearation
of full Islamic economic system4
>>+> &b) A workabl' ',onomi, s0st'm whi,h will
'nabl' *akistan to 3lourish and 2ros2'r in th'
li/ht o3 th' 2rin,i2l's o3 Quraan and Sunnah+
0s shown in the boo&let !"#$%based interest%
free ban&ing is wor&able and will surely bring
roserity in the country4
*ra0'r &i) La0 down and d',lar' th' 2rin,i2l's o3
Islam on th' basis o3 whi,h th' '9istin/ laws- 3or
and in r'lation to th' 1u'stion o3 Riba- ar'
s,rutiniA'd and '9amin'd and an authoritati('
('rdi,t /i('n as to th' lin's alon/ whi,h th'
12)
'9istin/ s0st'm ,an b' r'mod'l'd so as to brin/ it
in ,on3ormit0 with th' r'1uir'm'nts o3 Islam+
!he authoritative verdict of 1(%11%/1 was given
by the Federal Shariat #ourt after the e1isting
laws; for and in relation to interest; which were
defended on behalf of the Movernment by best
available legal talent; were thoroughly e1amined
and scrutini5ed on the basis of the rinciles of
Islam ade6uately e1lained and documented in
the e1haustive -udgment4 0ny further laying
down of rinciles in this connection is
absolutely un%necessary4
0s regards remodeling of the e1isting ban&ing
system so as to bring it in conformity with the
re6uirements of Islam it was the duty of the
Movernment to find out a method to accomlish
this tas&4 3owever; a ready answer for enabling
the Movernment to roceed immediately to re%
model the e1isting system is available in this
boo&let which illustrates wor&able method for
starting interest%free ban&ing system4
*ra0'r &ii) !ir',t that in ord'r to a(oid ,r'atin/
a (a,uum- th' 3un,tionin/ o3 th' '9istin/ s0st'm
ma0 not b' disru2t'd until su,h tim' that a
modi3i'd s0st'm has b''n 2ut in 2la,'+
!his rayer see&s ermission of the Federal
Shariat #ourt for the Movernment to delay
elimination of interest which is so severe a crime
12/
in Islam that 0llah has given in 9uraan warning
of war from 0llah and 3is <asool saws against
those who do not give it u4 !he most e1tra%
ordinary warning of war shows that interest
cannot be ermitted in any circumstances for any
duration and that it can be given u without any
difficulty because 0llah says GALLAH ITE!S
EVERY "ACILITY "OR YO$= HE !OES OT
WAT TO *$T YO$ I !I""IC$LTIESH
>2F1)*?4 It is absolutely wrong and baseless
contention that interest cannot be eliminated at
once and that it should be done gradually and
comletely eliminated when an interest%free
ban&ing model has been ut in lace4 .yed 0bou%
al%0ala "audoodi wrote in his authentic boo&
7SOO!8 in ,rdu Gso long as interest is ermitted
by law and interest%based contracts are admitted
and enforced by courts and money lenders are
allowed to collect deosits by giving temtation
of earning interest it is not at all ossible for an
interest%free financial system to come into
e1istence and grow444 4 :henever it is to be
accomlished interest shall have to be banned by
law in one single starting ste4 !hen interest%free
financial system will come into being
automatically and necessity; which is the mother
of invention; will ave the way for it to develo
and e1and in all fieldsH4 Aothing li&e a vacuum
or disrution will haen in converting the
e1isting system into interest%free ban&ing system
112
in one single ste by substituting interest with
!"#$4
I- Is,am there is -o 2a2a,ism a-d -o +od3
ho.soe4er hi0h i- status or ,ear-i-0 has the
authorit3 to 0ra-t 2ermissio- to a-3 o-e$ i-
a-3 1ir1umsta-1es a-d o- a-3 a11ou-t$ to
4io,ate A,,ah=s 1omma-ds. A-3 o-e 0ra-ti-0
su1h a- u-/authori7ed 2ermissio- .i,, +e
1rossi-0 i-to Di4i-e Rea,m. E4e- i- se1u,ar
s3stems -o +od3 is a,,o.ed to re+e, or a1t
a0ai-st ,a..
The a+o4e dis1ussio- ,eads to the 1o-1,usio-
that the )o4er-me-t of Is,ami1 Re2u+,i1 of
Pakista-$ as a first 4ita, ste2 to.ards
fu,fi,me-t of its de1,ared 1ommitme-t to
esta+,ish Is,ami1 order i- the 1ou-tr3$ must at
,east order immediate e,imi-atio- of I-terest
a-d sto2 the o-/0oi-0 .ar a0ai-st A,,ah a-d
'is Rasoo, a#$ .ithout .aiti-0 for the
out1ome of the 2etitio- to the Federa, Shariat
Court.
111

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