Federal Shariah Court’s Judgement on Ribā: An Appraisal and Some Suggestions

Abstract

Purpose: This article aims at presenting an appraisal of the judgment of
Pakistan’s Federal Shar¯ı‘at Court (2022). It is also to suggest steps for
filling the gaps for transformation of the country’s economic and financial
system to Islamic bases.
Methodology: It is qualitative research that analyses the judgment based
on its contents, various provisions of Pakistan’s Constitution, and the legal
framework for the banking sector.
Findings: There are some gaps in the judgment which the Court may
like to fill. The riba¯ involved in delayed exchange of currencies or
Forex exchange in present day finance may also be expressly declared as
prohibited. Further, the FSC has not taken notice of such doubtful products
and tools used by the Islamic banks that are increasingly deteriorating the
integrity of Islamic banking among the public.
Significance: It is the first ever academic study to analyze the judgment,
and discuss its implications for banks, economy and the potential of Islamic
banking in the country. Research Limitations/Implications: Because of
paucity of data, it does not consider the implications of the judgment in
case of transformation of the public sector financing or banks’ investment
portfolio to Islamic principles.
Practical and Social Implications: The article will enable the financial
sector regulators and the managers of the economy to take proper and
timely actions for smooth and effective transformation of the economy to
Islamic principles.
KAUJIE Classification: Q6, Q7, H13, L3
JEL Classification: E4, G21, Z12