Aug 09 - 15, 2004

"Do you think we should have Islamic Banking and do you think that it is a better and more just form of Banking?" "Yes. But is it practicable? And is it really different from conventional Banking?"

Given above is an oft-repeated question and an oft-repeated response. Let us begin the argument by what most of us would agree on.

Muslims would say, "Yes, we should have Islamic Banking, because it helps us keep our faith and follow the injunctions of our religion while conducting our business and banking. It helps us avoid the wrath or displeasure of Allah Subhanahu wa Taala and His Last Prophet, Peace Be Upon Him, who have clearly forbidden us in very strong terms to work on Riba or interest-based system of commerce."

Others, who have studied the system of Islamic Banking and Economy without any bias would perhaps say, "Yes, a system of Banking and Commerce based on the principles of Islamic Shariah does appear to have a lot of merit, it does appear to be more just, it does seem to be less exploitative and it does seem to address a lot of troubling problems and issues created by the conventional system of Banking and Economy, offering solutions and alternatives that are worth being seriously considered and explored."

But they and the many shades of people in between, would probably wonder whether Islamic Banking and Economic system really has practical alternatives to conventional systems and whether it is also practicable. To find a short answer, we need to look at the increasing number of Islamic Financial institutions being established and which are already operating successfully in Pakistan, in other Muslim countries and even in some non-Muslim countries. For those willing to go beyond the short answer and who are more seriously interested in exploring the subject, one would suggest going through the growing amount of literature and reports now available in libraries, bookshops and on the Internet covering the subject. Those interested in looking at one particular source that addresses most of these issues, one may read the "Pakistan Federal Shariat Court Judgement on Interest (Riba)", published by Islamic Research and Training Institute of Islamic Development Bank, Jeddah in 1995. It not only gives the detailed judgement of the Pak. Fed. Shariat Court, which itself is quite informative but also gives answers obtained from renowned scholars to a set of pointed questions on subjects such as, the definition of Riba, practical shape of interest-free banking system, alternatives to government's interest-based borrowing system, remuneration for use of capital, effects of devaluation of currency and inflation on borrowings, alternatives to conventional system of banking foreign trade, status of interest on transactions between countries, alternatives to conventional insurance business, status of interest on provident funds, prize money on bonds and bank accounts, permissibility of interest on business loans as opposed to consumption loans and incentives for saving and economising the use of capital in case interest is abolished. (Interested readers may also review the historic judgement of 23rd Dec., 1999 of the Shariat Appelate Bench of the Supreme Court, on the subject).

Time and space does not permit even summarising here the points made on the various issues mentioned above, but the publication referred, having only 400 pages or so, would be a good starting point for people seriously interested in exploring the subject. At the very least, it puts you on the path of realizing that Islamic Banking is indeed practicable, it has workable alternatives to conventional banking and it is fundamentally different from conventional banking. The basic difference that emerges in one's mind is that Islamic Banking, like the Islamic Shariah, is more focused on the means to an end rather than the end itself. While it is concerned with the bottom line, profitability and growth like the conventional banking system, it is more concerned with how we achieve these objectives. It underlines that all our commercial endeavours, like all other endeavours of life, must be justified on the touchstone of right or wrong, ethical or unethical, moral or immoral, Halal or Haram and meant for larger and longer term good of the society and the individual or not.

Now, should a commercial venture like banking be subject to such a puritanical scrutiny? Wouldn't it make it more difficult for an Islamic bank to achieve the same business objectives as a conventional bank? The answer is yes and yes, because one does not give up pursuit of higher ethical and indeed business objectives only because of difficulties in its way.


Islamic Banks, with viable and better alternatives, are there to meet your banking requirements. Talk to them for details, support them in their efforts and guide them where you can, if you share the ideal of conducting our business of banking and commerce while keeping faith too.