Eliminating Interest from Loans to Provincial Governments and other Government Agencies

For many years almost the entire development budget of the provincial governments was financed by the federal government. In this situation it seemed illogical on its part to charge interest on cash loans made available to the provinces. The federal government should be in a position to reduce the development grants to the extent that it docs not have to charge interest from the provinces. Some of the fears about the misuse of funds by provinces under this arrangement have been adequately addressed in a report of International Institute of Islamic Economics on the subject.

Dr Faiz Muhammad

Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.