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RECORDER REPORT

KARACHI: Mufti Rafi Usmani, Mufti-e-Azam Pakistan has said that Musharaka and Modaraba are the real modes of interest-free Islamic financing, but as an interim measure, other modes of Islamic financing such as Marabaha, Istisna and Ijarah can be used.

Addressing a seminar on Islamic Mode of Financing organised by the Karachi Branch Council of Institute of Cost and Management Accountants of Pakistan (ICMAP) on Friday, he said that the real benefits of interest free Islamic mode of financing could be felt only when Musharika and Modaraba are used, and it can prove the claim made by Islam that its system of economy is based on justice compared to other systems.

Replying to questions that Marabaha and other forms of financing were not a hundred percent Islamic mode of financing. Mufti Usmani said that Murabaha and other forms could not be recommended as permanent methods, but however it was better to adopt Murabaha than resorting to interest-based banking.

Referring to the role of the state in the enforcement of Islamic banking, he said that at present State Bank regulations were obstructing the Islamic interest-free banking, as under the rules, investment banks are not allowed to indulge in leasing.

He said that the Supreme Court had given the Government a year and a half to return to the Islamic mode of financing.

He said that work had already begun in framing rules and regulations for Islamic banking and some of these regulations could be enforced within next two months and in this way, the entire system could be rid of interest-based banking.

The Mufti said that if the business community was united and forced the banks to resort to interest-free banking, the system could come into force within a month.

Responding to the questions raised at the seminar, another prominent speaker Imran Usmani, the Sharia Advisor for Al Meezan Investment Bank, said that while conducting business in Mudaraba and Musharika modes, bank have to take great care in selecting companies, which should be free from corruption.

When asked how the Islamic mode of financing would protect the principal amount of widows and the disabled who invest their money in saving schemes and get a fixed profit, Imran said that in Islam, any profit obtained without taking any risk is Haram. But in the Islamic system there are other methods to cover the risk. One of these methods is Takaful, the Islamic alternate of insurance.

Defending Marabaha, Imran Usmani said that It is asset-based financing and there is a difference in interest and Marabaha in the event of late payment. In the conventional system, interest continues to increase in case of late payment, whereas in Marabaha there is no concept of late payment and if there is any, the defaulter has to pay certain penalty which is contributed to charity.

Usmani said that diminishing Musharka was based on joint ownership between the Lesser and the lessee. The lesser provides investment to the lessee for construction of house and the investment is returned from the rental income untill the entire loan is paid and the lessee gains control of his house.

He said that the problem of liquidity management in Islamic banking has also been solved and a pool of investment has been created in which the Islamic banks can place their surplus money without any interest.

The seminar was also addressed by Naseeruddin A. Khan, General Manager Specialised Funds, Al Taufiq Co. Dalla Albaraka Group., Pervez Saeed and Mahmood Ashraf .

M.H.Asif, the President of ICMAP welcomed the guests and spoke about the importance of the seminar.