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Educating the Public on the Merits of Interest-free Economy

Advocates of an interest-free economy have two main tasks to accomplish in order to gain popular acceptance of their views. First, they must demonstrate the normative merit of their position. That is, they must present arguments that lead to the conclusion that Pakistan as a Muslim state should abandon an interest-based economy. Second, and perhaps more important, they must demonstrate the feasibility of operating an interest-free economy in modern times. That is, they must present arguments that lead to the conclusion that mechanisms exist or can be devised that will reconcile an interest-free system with the requisites of domestic and international banking. It is generally acknowledged in Pakistan that Islamic activists have made a much more convincing case for the former proposition than the latter.

Fundamentally, the normative case for the abolition of interest in Pakistan relies on a direct reading of the Holy Qur’an [2:2751:


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Those that devour riba will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: “Trade is like riba”

But Allah hath permitted trade and forbidden riba. Those who after receiving direction from their Lord desist, shall be pardoned for the past; their case is for Allah to judge. But, those who repeat the offense are Companions of the Fire, they will abide therein forever.

Of course, there is no question as to the authority of the Holy Qur’an but there is a millennial debate concerning what constitutes riba. Islamic activists are of the view that riba stands for interest in all its types and forms.15 Others are of the opinion that riba should be translated as usury and the Qur’an’s prohibition, as a consequence, does not extend to state-regulated banking practice. Islamic activists claim that an overwhelming majority of Muslims in Pakistan subscribe to the former view.

Moreover, when it comes to the question of putting this norm into practice there is considerable disagreement, particularly among those who would be responsible to administer an interest-free system — economists, bankers, politicians, and bureaucrats. Since the late 1970s, as a consequence, numerous symposia have been held dedicated to the task of defining the modalities of an interest-free economy. Most such conferences have been linked to the Jamaat-i-Islami or a like-minded Sunni institution, and many have been funded directly or indirectly through the largesse of Saudi Arabia. One fruit of such conferences has been an extraordinarily vibrant and proliferating literature pertaining to Islamic economics.

Unfortunately for would-be Islamic reformers, such Herculean efforts have been rewarded with few conversions from among the mainstream of Pakistan’s economists and bureaucrats. For instance, the Pakistan Institute of Development Economics (PIDE) conference held in Islamabad during January 1992, attended by the author, largely ignored the implications of an interest-free economic system for Pakistan’s development process. This omission was particularly notable in light of the then-recent and much publicized November 1991 decision of the ESC declaring riba repugnant to Islam.

 

Source: Islamization of Laws and Economy: Case Studies on Pakistan, Charles Kennedy. Republished with permission.