Islamic banking in Pakistan: Fiqa-e-Jaferia offers optimization

Abstract

Islamic banking is an initiative of State Bank of Pakistan (SBP) and Shariah scholars for purifying the financial and economic system of Pakistan from interest (Riba). The framework of Islamic banking guides banks to customize their policies and product mix in conformance with Shariah standards. Despite targeting a noble cause of eliminating interest (Riba) from the economy of Pakistan, the existing practices of Islamic banks and certain aspects of the framework of Islamic banking face logical objections. Due to inappropriate operational measures, Islamic banks are yet criticized for not having embraced Islam completely. Islamic banks are found adopting Islam in parts and chunks. Islamic banks are epitomized by certain sect instead of Islam and further, they are not imbued to alleviate poverty from mass root level being mere commercial enterprises. Fiqa-e-Jaferia explains Islam based on the Holy Quran and teachings of Prophet Muhammad (SAAW) explained by Imams in his Ahl-e-Bait (AS). By now, the Islamic banking framework and Islamic banks are not benefited by the input and support of Fiqa-e-Jaferia. The study discovered that the aforementioned objections on Islamic banking can be rectified through incorporating guidance of Fiqa-e-Jaferia. In January 2008, this study joined an Islamic bank that was functioning as per Fiqa-e-Hanafi to observe and experience the norms and practices in Islamic banks. It investigated and interpreted the root cause of short comings in Islamic banking rendering it objectionable. Since January 2008 to date, the study compared the two major fiqas that are Fiqa-e-Jaferia and Fiqa-e-Hanafi with the intention of contributing a consensus on Islamic banking for strengthening this noble cause. In the light of Fiqa-e-Jaferia, the study has identified Kibor Halal for SBP and number of opportunities for SBP, Islamic banks and stakeholders for optimizing the framework and practices of Islamic banking. The study recommends a solution to resolve all objections on Islamic banks and Islamizing the entire banking industry within three steps. It recommends engaging SBP, banks and their clients in a double tier master slave relationship such as Slave 1 (bank) – Master (SBP) – Slave 2 (client) to get the entire banking functions Halal with a little modification in the mechanism of banking. It invites divergent Muslim scholars and SBP to reach a consensus considering Islamic banking as a national cause instead of keeping it as a mere commercial movement. It offers opportunities for further research, development and unity among divergent sects to strengthen both Islamic banking and Pakistan. The ultimate milestone is recommended to be an Islamic financial system seeking interest free economy, implementing real spirit of Islamic financial culture shielded from capitalistic and satanic intentions and norms.