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From July 1 - Pak government can not deal in interest

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    From July 1 - Pak government can not deal in interest

    We have been discussing whether riba/interest is economic suicide or what is interest and how to get around it. Some of the opinions may be right, some are point-blank incorrect (in the garb of personal feelings). My question is different.

    The question here is,

    "Are we ready?"
    Is the government of Pakistan ready?

    Whether the decision is right or wrong, whether it is suicide or not, it is the law. And the government is bound to implement the law.

    Do you know the meaning of the Supreme Court Shiaria Appellate tribunal's decision of April 1999? In simple words it means

    Pakistan is bound to shun all interest-based transactions from July 1. It cannot negotiate, least of all accept, any loan carrying interest. A number of laws, including all enactments relating to banks and recovery of loans, the Insurance Act, the Savings Banks Act, the Civil Procedure Code and SBP Act, shall have to be extensively amended to replace the existing financial system with an interest-free economy.

    Commercial banks will no longer be able to extend loans on the basis of mark-up, which has been held un-Islamic. The so-called profit-and-loss accounts will come to an end. Savings certificates will not fetch fixed profit and will all become 'units of a mutual fund'. The prize bonds schemes will cease to exist. The government, in short, will neither pay nor charge interest on domestic borrowings in any form. Contractual obligations in respect of existing foreign loans will be discharged but an effort will be made to renegotiate them without seeking any interest-bearing loan after July 1.
    Get it?

    In the next 17 days, are we ready to do all that? Many aspects of the ruling directly effect common people. You all know how many retired ppl have their life earnings in 'National Savings'. Everyone has a P&L account. Many ppl get motor loan and car loans. Well, news, news... all of that is gonna be revised considerably.

    Make no mistake. The review petition by UBL has a very limited scope and insofar as the constitution is concerned, there is no provision even for a review. As for extension, time frame is of the essence of the SC judgement.

    I think, yet again, Pak govt. is in deep deep trouble. They will have to arm-twist the Supreme Court to get out of this mess in some extra-constitutional way. They had more than a year to do all these things and now it is down to the last 17 days, and they have done zilch!

    Some parts of the above post include references from Dawn

    [This message has been edited by Peacemaker (edited June 13, 2001).]

    I dont get it.. why should the Profit & Loss a/c come to an end even if there would be only interest-free transactions.
    Are you saying that keeping records of Profit/Losses is also 'haram' in Islam ?


      To be frank the P&L system devised by the banks in 1981 was just a renaming of interest. It doesn't meet the required criteria of Riba-free transactions. Amongst other things it didn't had the possibility of loss.

      Come July 1, unless something extra-constitutional happens to delay the implementation, or the government implements a change, the Banking law dealing with P&L accounts will be revoked, meaning the P&L accounts will no longer have a legal cover.

      And yes, to answer your other question, if Riba is haraam, then anything to deal with Riba is also haraam, and so is accounting for riba, calculating riba, getting or paying riba, negotiating riba or helping someone do any of those things. All is haraam. Prohibited.

      In the Supreme Court decision, after their deliberations, they had concluded that the modern day commercial interest is indeed Riba. There is no pre-condition that it has to be excessive interest or anything like that. All interest is haraam. Now, whether we agree with it or not, is moot. The decision is final and there is constitutionally no further review. The final decision was made by the Appellate Tribunal of the Supreme Court Sharia Bench, which is the sort of last last decision-making authority.

      The present review petition is very limited in scope and is only for the timeline. Thats all.


        Actually no Peacemaker, there won't be a couple over haul of the system.
        The reforms are far more moderate that what is going around in rumors.
        If pristine can get on this thread and explain the 2 M's - by which in islam you can earn money of lending.
        I can't spell them and my knowledge on islamic banking is far too limited.
        What is going to happen is that the word and aspect of interest will be erased.
        Profit and loss will remain though true there will be an aspect of loss now.
        Also these 2 M's will come into play as well.
        Also the statement of July 1st will be upheld, but the supreme court to the best of my knowledge did not say which or what exactly has to be implemented till July 1st.
        This is extremely vague post, but i will get more info when i talk to relatives back home.
        The riba free system is not as big a deal as people are making it out to be.

        Our's not to reason why,
        Our's but to do and die:
        You can't fix stupid. So might as well troll them!


          Actually, whether or not present day commercial interest or mark-up is RIBA or not, is a moot point now. This issue was debated for several years in High Court, Shariat Court and Supreme Court of Pak and has been through all processes of appeals. The final decision on this regard was made by the Supreme Court Sharia Bench Appellate Tribunal, which is the final final authority. That bench had 3 supreme court judges and two religious scholars. After detailed arguments from both sides, they reached this decision.

          I am sure during that time all these arguments, about inflationary forces, non-excessive interest rate, possibility of loss, modern economics, international loans etc etc were discussed. And despite all that, the end verdict was that whichever way you may turn the argument, the end result is the same... it is "Riba". We may not like it. We may argue ad infinitum that this decision lacks sense, is a economic suicide, its impractical, is islamically wrong... its all moot... cz the decision is done, and is final.

          And no. I have read the complete decision, and it includes every relevant law, right down to the section number and the clause which needs to be amended by July 1, 2001, or it will automatically be cancelled as of that date. These laws include banking laws, commercial laws, and regulations of State Bank of Pakistan. The decision is very detailed in the sense that they have exactly pin-pointed which clauses and which sections of all these laws are against the injuctions of Islam bcz they allow 'riba'.

          I am more worried at this stage, that the government seems ill-prepared to do anything. Unless they can come up with a barrage of legislation in the next 15-16 days, they will be caught napping on July 1.


            There are several islamic ways of banking, and they are distinct since all of them are arabic-sounding names

            By M's, u probably mean

            Modaraba, and

            In addition, there are

            and many others islamic banking products.

            Summararily speaking, to a laymen, these may seems quite identical to current banking products, but these have been devised by Islamic scholars in line with what is permissible and what is prohibited.

            The following is not a complete list, but for starters, in Islamic banking the following should be present.
            [list=1][*]The possibility of loss as well as profit.[*]There should not be a time-based penalty or interest. The amount due should be final and stated up front.[*]The investor should know exactly where his money is being invested.[*]The bank is allowed to make installment sales.[/list=a]
            'Ijara' is an Islamic form of Installment Purchases or what we call in modern banking as 'Finance Lease'. Though from the wording of the contract, to the clauses that deal with rate of purchase/sell, it is approved to be islamic.

            However, this is a separate discussion. Lets do it, whenever you are ready. The details of islamic rulings on riba are fascinating and are quite complex. The penality for dealing in Riba is so severe that it is not worth the risk. We may have to pull in Partypooper bcz he has an amazing knack of doing fabulous research

            [This message has been edited by Peacemaker (edited June 14, 2001).]


              Decision delayed for one year. Now the government has till June 30, 2002 to wake up and put its act together


                Yeah just saw that.
                Here is the link:

                Thanks for All the info.
                The reason i asked for the 2 M's.
                Is that these two are the most closely related to the modern interest system in my opinion.
                I have found out more about the islamic banking system here than anywhere else.
                Also i guess i thought i wasn't possible as my econ teacher - a syrian - thinks that the arabs are stupid - he said that - and that the riba system is typical of the arab intellect - his words.
                So he basically says that the interest is a must.
                Anyway we have 1 year to deal with this.
                I hope they get it done properly before the due date.

                Our's not to reason why,
                Our's but to do and die:
                You can't fix stupid. So might as well troll them!