Pakistan needs to transform its financial system into an equitable, asset-based, risk-sharing, and interest-free one to avoid the ills and risks that come along with an interest-based system, two leading business community members said.

Senior Vice President of Pakistan Businesses Forum (PBF) Muhammad Riaz Khattak said the business community supports the transformation of Pakistan’s economy and banking system into a riba (interest)-free system in accordance with the decision of Federal Shariat Court (FSC).

Talking to a delegation of Peshawar Small Chamber of Commerce in Peshawar, he said the Shariat Court decision requires elimination of interest from the economy and banking system completely over the period of next five years.

According to a statement received by WealthPK, Riaz Khattak reminded that the Shariat Court has set 2027 as the deadline for a complete ban on interest. He said five years is enough to implement the decision.

The verdict requires the government to make necessary regulatory changes for the shift to an interest-free financial system.

The PBF senior vice president said that Islamic banking has been enhancing its operation successfully and prudently in Pakistan, and the market share of deposits and assets of Islamic banking in the total banking industry was 19.4% and 18.6%, respectively, for the year 2021.

Riaz Khattak said the net financing by Islamic banking institutions has increased by 38.1% in 2021, which is very strong growth in financing by any standard. He also mentioned that on a macroeconomic scale, Pakistan’s total revenue collection was expected to be Rs7 trillion in fiscal year 2022-23, out of which Rs4 trillion or 56% would go towards debt servicing and interest payments.

The PBF Vice Chairman KP chapter Malik Fareed also proposed that the State Bank of Pakistan (SBP) should come up with a clear roadmap and framework for conversion of the interest-based system to an interest-free one in the stipulated time-frame of five years in line with the FSC verdict.

He stressed that the Ministry of Finance, Ministry of Law, Banking Council and other stakeholders should come together and work towards making Pakistan an interest-free country.

Credit : Independent News Pakistan-WealthPk