Analysis of Minor Proposals outside the Mainstream Islamic Finance in Pakistan
October 3rd, 2017
By Salman Ahmed Shaikh
This paper is a humble attempt to discuss the minor proposals which are outside the mainstream Islamic finance in Pakistan. Some of the minor proposals like two-tier Mudarabah are not used widely because of lack of preparation, government incentives and initiatives at the practical level in the current scenario. Some other proposals like rationalizing bank interest through non-textual arguments (other than in Qur’an and Hadith) are not in compliance with Islamic source texts (Qur’an and Hadith). Furthermore, some minor proposals have misapplied the Islamic contracts, such as Qard-e-Hasan as in Time Multiple Counter Loan. There are several features in conventional banking and finance which contradict with Islamic injunctions directly without any ambiguity. Islamic banking first and foremost attempts to be interest-free as well as avoid other non-permissible elements in Islamic contract law and rules of sale. In the presence of practiced Islamic banking and its growing penetration, accessibility and growth, Islamic banking should be preferred over conventional banking and finance products if one wants to be compliant with Islamic injunctions. Islamic banking alone might not be the only solution to meet all sorts of economic and social objectives. The simultaneous growth of Islamic social finance in the form of Waqf and institutionalization of Zakat and Qard-e-Hasan based microfinancecan contribute in completing the access to Islamic finance to people of different economic standings. Now, people of all socio-economic sections can be served through either commercial Islamic banking and/or through Islamic social finance institutions. Thus, Islamic finance itself as a combination of commercial and social finance institutions is fast appearing to be a comprehensive and complete alternate financial system for the faith conscious clients. As a result, there is no need to rationalize conventional interest based banking in part or in total.