ISLAMABAD – The Federal Shariat Court on Wednesday declared the Interest Act 1839 of Pakistan un-Islamic, directing the government to replace the Riba-based financial system with Islamic system in five years.
The full bench of the top Islamic court headed by Chief Justice Muhammad Noor Meskanzai, and comprising Justice Dr. Syed Muhammad Anwar and Mr. Justice Khadim Hussain M. Shaikh reserved the judgment against Riba case on April 12.
The long-pending Riba case was remanded by the Shariat Appellate Bench Supreme Court of Pakistan in 2002.
Justice Syed Muhammad Anwar announced the verdict, stating introducing interest-free banking system in Pakistan is possible as it is being practiced by some institutions in the country.
The court ruled that elimination of Riba is base of the Islamic system, adding that interest taken on any type of loan falls within the category of Riba, which is prohibited in Islam.
Interest payment on all interest and external debts by the government is Riba, the top Islamic court ruled and directed the government that transactions with international institutions including IMF and World Bank should be made interest free.
The government should remove the word “interest” from every law, the order said.
From June 1, all legal clauses that contain the word “interest” will be considered null and void, the shariah court said.
It observed that thirty percent banking in Pakistan has shifted to Islamic system under the strategic plan of the State Bank of Pakistan (SBP).
