20000309Ishrat seeks scholars help for Riba-free economic system

RECORDER REPORT

ISLAMABAD: State Bank Governor Dr Ishrat Hussain on Wednesday urged scholars to work out complementaries in legal and judicial system in sync with Islamic banking system in the country.

Speaking at the inaugural session of a seminar "Towards Islamic Banking" at the Institute of Policy Studies, the governor said that without working out these complementaries, the transition to interest-free Islamic financial system would be incomplete or only partial.

He said the financial system could not be isolated from judicial and legal system which would "provide comfort to lenders" and added that the present system is not in a position to measure up to the new system.

The experience of Tabung Haji, Malaysian organisation for facilitating Haj, which is serving as a great catalyst for savings and economic development, is the high point of the seminar. A number of foreign experts and bankers are attending.

Dr Ishrat Hussain said that Pakistan needed a different system where ideals of Adl-o-Ehsan should be supreme which can bring about a radical shift from the present exploitative system.

The capitalistic system was good for allocating resources but not for equity, while the communistic system was equitable, but allocation of resources was not so. Islamic system, he added, should provide a judicious combination of both which could be a model for both.

Conceptually, there is some work done but in-depth studies are needed on Riba-free system of financial intermediation.

A few banks like Pak-Libya Holding, Al-Mezan Bank and Al-Baraka banks are doing some useful work. But for transformation to Islamic financial system, much work is to be done in the fiscal, monetary and legal fields.

Referring to the follow-up action on the Supreme Court verdict, the governor said the government has started implementing it in all sincerity. The SBP has already formed a commission on transformation of the economy. The commission has set up a number of committees and sub-groups that are studying the literature on the issue and examining the investments. Besides, a working group in the Finance Ministry is looking into questions of borrowing, recurring budget deficits and allied issues with an open mind. Dr Ishrat said the government would welcome tangible solutions to the problems like regulation of flow of credit; value of money over time; and how to ensure orderly transition to interest-free system.

He said that the financial system should not be isolated from the judicial and legal system and the latter should also be compatible with interest-free financial system.

Earlier, Prof Khursheed Ahmed said that induction of Islamic interest-free banking as enjoined by the Supreme Court order, is not the be-all and end-all of the order but it should encompass the entire financial system. Enforcement of Shariah is a continuous process and so would be the change to Islamic financial system. Tabung Haji, a financial institution for Haj, is proving a very important financial institution. Similarly, Islamic bank in Bangladesh has been a success story of interest-free banking.

Prof Khursheed also praised Dr Ishrat for his criticism of the elitist economic system and his bold and valuable assessment that economic and political power has been monopolised by elite in Pakistan.

Prof Khursheed said that the capitalist system in vogue in many countries is geared to concentration of wealth in few hands, certain countries and regions. And the new globalisation process is going to be mechanism for perpetuation of hegemony of elitist countries.