<p>Pakistan will abolish in five years the interest in the banking system and replace it with the Islamic mode of banking, Finance minister Ishaq Dar said on Wednesday.</p>.<p>Dar, while addressing a seminar organised by the Federation of Pakistan Chambers of Commerce and Industry in Karachi on the issue of interest-free banking, stressed that the present government was working to convert the existing banking system to an interest-free one.</p>.<p>He said that mutual funds, capital funds, and insurance businesses should also be promoted on an Islamic model.</p>.<p>“This is not something that cannot be done within five years. It can be done within five years,” he said, urging the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) to play their role in achieving the target.</p>.<p>Dar said that a lot of work had already been done and the Meezan Bank which had only 100 Islamic banking branches in 2013-2017 had now 1,000 outlets.</p>.<p>The assets of Islamic banks as of September 2022 were Rs 7 trillion while their deposits were Rs 5 trillion. “So a base has been created and we have to make this a successful system,” he said.</p>.<p>The announcement came months after the Federal Shariat Court (FSC) in April declared the prevailing interest-based banking system against the rule of Sharia.</p>.<p>It ruled that the federal government and provincial governments must amend laws and ordered that the country’s banking system should be free of interest by December 2027.</p>.<p>Commercial banks and the SBP subsequently challenged the FSC verdict before the Supreme Court (SC).</p>.<p>However, Dar, earlier this month announced the government would withdraw the State Bank of Pakistan (SBP) as well as the National Bank’s (NBP) appeals.</p>.<p>He also said that the government would try to implement an Islamic banking system in the country as early as possible.</p>.<p>The issue of interest has been coming up again and again in the country as usury -- the practice of lending money at unreasonably high rates of interest -- has been strictly forbidden (haram) in Islam and this practice has been declared as a war against God.</p>.<p>After decades of debates and research, almost all banks in Pakistan have introduced Islamic products like car loans, home loans, Islamic accounts, etc.</p>.<p>It is said that the extra money charged by the bank on loans or profit paid on deposited money is not charged as interest as it is not fixed and is based on the concept of profit and loss.</p>.<p>Those against the Islamic banking system term it a roundabout way of dodging interest while charging the same in some other category.</p>.<p>However, all major banks offer both traditional and Islamic modes of business and customers opt for the one suiting their beliefs and advantage.</p>
<p>Pakistan will abolish in five years the interest in the banking system and replace it with the Islamic mode of banking, Finance minister Ishaq Dar said on Wednesday.</p>.<p>Dar, while addressing a seminar organised by the Federation of Pakistan Chambers of Commerce and Industry in Karachi on the issue of interest-free banking, stressed that the present government was working to convert the existing banking system to an interest-free one.</p>.<p>He said that mutual funds, capital funds, and insurance businesses should also be promoted on an Islamic model.</p>.<p>“This is not something that cannot be done within five years. It can be done within five years,” he said, urging the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) to play their role in achieving the target.</p>.<p>Dar said that a lot of work had already been done and the Meezan Bank which had only 100 Islamic banking branches in 2013-2017 had now 1,000 outlets.</p>.<p>The assets of Islamic banks as of September 2022 were Rs 7 trillion while their deposits were Rs 5 trillion. “So a base has been created and we have to make this a successful system,” he said.</p>.<p>The announcement came months after the Federal Shariat Court (FSC) in April declared the prevailing interest-based banking system against the rule of Sharia.</p>.<p>It ruled that the federal government and provincial governments must amend laws and ordered that the country’s banking system should be free of interest by December 2027.</p>.<p>Commercial banks and the SBP subsequently challenged the FSC verdict before the Supreme Court (SC).</p>.<p>However, Dar, earlier this month announced the government would withdraw the State Bank of Pakistan (SBP) as well as the National Bank’s (NBP) appeals.</p>.<p>He also said that the government would try to implement an Islamic banking system in the country as early as possible.</p>.<p>The issue of interest has been coming up again and again in the country as usury -- the practice of lending money at unreasonably high rates of interest -- has been strictly forbidden (haram) in Islam and this practice has been declared as a war against God.</p>.<p>After decades of debates and research, almost all banks in Pakistan have introduced Islamic products like car loans, home loans, Islamic accounts, etc.</p>.<p>It is said that the extra money charged by the bank on loans or profit paid on deposited money is not charged as interest as it is not fixed and is based on the concept of profit and loss.</p>.<p>Those against the Islamic banking system term it a roundabout way of dodging interest while charging the same in some other category.</p>.<p>However, all major banks offer both traditional and Islamic modes of business and customers opt for the one suiting their beliefs and advantage.</p>