Pakistan’s economy continues to remain in doldrums but its leaders believe that symbolic gestures are all that’s needed to assuage the people and stay in power.
Finance Minister Ishaq Dar’s recent announcement that by 2028 Pakistani banks will no longer charge interest because it is ungodly and un-Islamic is one such decision. While Pakistanis may applaud Dar for his new-found religious zeal, in reality it is simply crass opportunism and populism. Facing Imran Khan who has pushed politics to the right, this is Dar and PML-N’s way of doing the same.
According to author, physicist and columnist, Pervez Hoodbhoy, Pakistan has been there and done that. In 1991, when Nawaz Sharif was Prime Minister for the first time, the Federal Shariat Court ordered Pakistan’s economy to dump interest within 12 months. Nothing happened. “So, recycling an order from 30 years later is no big deal.”
However, as Hoodbhoy notes, “this will not end ideological bickering on what interest-free banking actually is. Its two versions, soft and hard, are totally incompatible opposites. In the first, at the end of a stipulated period the depositor expects — and receives — a sum exceeding his initial deposit. In another country, the excess is known as interest but in Pakistan they call it profit. The depositor is clueless about wheeling-dealings inside board rooms and management offices. Nevertheless, heavy use of Arabic words and absence of ‘interest’ gives an Islamic veneer to the bank.”
However, as Hoodbhoy notes, “The hard version is uncompromising. In 2014, the top ulema of the Fiqhi Majlis declared that so-called Islamic banking merely re-labels interest as profit and so is hiyal (legalistic trickery). They point to the explicit Quranic injunction: “Allah has permitted trade and has forbidden interest” (2:275). ‘Forbidden’, they say, is not negotiating low or middle or high. Forbidden means zero — haram is haram and interest is usury. The influential Maulana Taqi Usmani, among others, takes this position. Bangladesh’s finance minister Dr Abul Muhith is blunter. He says Islamic banking deceives Muslims and is ‘all fraud’.”
What Pakistan is doing, Hoodbhoy clarifies is simply repacking. “Commercial banks repackage global financial products with some changed conditions. After a board of clerics chosen by the bank approves a product, it is advertised as Sharia-compliant. This sanctifies credit cards, derivative products, cross-currency swaps, equity swaps, adjustable mortgages, etc. Are Bitcoin and cryptocurrency halal or haram? Believe whichever you prefer; , muftis abound on either side.”
In conclusion, Hoodbhoy warns, that none of this will solve Pakistan’s economic problems because “Pakistan’s poor are poor because of rapacious elites, not because of riba or bank interest.”