Financial sector equipped to offer riba-free services: Experts

KARACHI: It is everyone’s religious and constitutional duty to develop and carry out a plan for converting Pakistan's financial system to one that is free of riba in accordance with Islamic law, experts said at a seminar.

All sectors of government borrowing, external debts, the banking sector, the non-banking sector, the capital market, as well as legal and regulatory framework, need to bring changes at strategic as well as operational levels.

This was underscored during a session titled “Implementing the FSC Judgment on Riba: Addressing the How”, jointly organised by the Institute of Policy Studies (IPS), IBA-CIEF (Institute of Business Administration’s Centre for Excellence in Islamic Finance), and Centre of Islamic Economics (A division of Jamia Darul Uloom, Karachi) at the IBA City Campus on Wednesday.

The session was addressed by IBA-CEIF Director Ahmed Ali Siddiqui, Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Secretary General Omar Mustafa Ansari, Chairman of the Shariah Advisory Committee of the State Bank of Pakistan and Securities and Exchange Commission of Pakistan, Mufti Irshad Ahmad Aijaz, Islamic Finance Advisory & Assurance Services (IFAAS) Group CEO Farrukh Raza, Meezan Bank Shariah Supervisory Board Vice Chairman Dr Imran Usmani, and IPS Chairman Khalid Rahman.

The experts highlighted that all of these financial and related sectors already have the capacity to convert existing non-Islamic procedures and means to Islamic standards by reinforcing the appropriate ways and means to implement the Federal Shariat Court judgment.

The speakers further emphasised that the federal government must devise a conversion policy with yearly targets and proper monitoring of all sectors. This national-level strategy must be developed with the consensus and inclusion of all stakeholders to ensure coordination and commitment to Shariah-compliant guidelines.

The government should also focus on creating an enabling environment by consulting all related organisations, introducing educational reforms, and taking capacity-building measures for officials. Along with that, national-level strategy and policy, sector-level planning is also significant.

Fintech, combined with tools of Islamic social finance, can provide solutions to challenges of financial inclusion through increased access to credit, financial safety nets, consumer protection, crowd funding models, and microfinance and entrepreneurship development. These tools like the qard-e-hasana model, micro-takaful, waqf, zakat, and sadaqat, can also create economic justice in the system.

The speakers laid out aspects foundational to bring the required change in the system: a vision that is shared and supported by all stakeholders and trusted by the people; political willingness and sense of ownership; defined targets and processes coupled with an action plan and resources; legislation and comprehensive regulatory supervision and its implementation; good governance; capacity building; and, system development through technology and infrastructure building.

As the lack of awareness and trust in people with regards to change weakens the advocacy for the cause, therefore, maintaining communications at all levels to create awareness and consciousness among people is equally important towards achieving the goal of a riba-free economy, it was highlighted.

They called for the need to keep talking about it at all levels and in all capacities to delineate that the Islamic financial system can provide solutions to economic problems, deliver justice, and fill the gaps and human needs.