Shari'ah Advisory Board
In the past, a great national effort for Islamising the banking system was wasted and the main objective of eliminating riba from the banking system could not be achieved as has been confirmed by the FSC judgement. The manner in which some modes of finance were implemented by Pakistan Banking Council has been held repugnant to the injunctions of Islam by the court. This has happened because the authorities concerned did not create a suitable framework for imparting Shari'ah advice and for monitoring the system from Shari'ah point of view.
To guard against a similar pitfall in future it is recommended that a Shari‘ah advisory board should be established as a permanent body which should work in close cooperation with State Bank of Pakistan. This board should have statutory powers to examine the documents and review the business practices used by financial institutions. The board should also have the powers to issue directives to banks to make changes in the documents and the business practices so as to bring them in conformity with the principles of Shari‘ah. A provision for the right of appeal should, however, remain available to the financial institutions.
In addition to a Shari*ah board, each financial institution should be required to establish a Shari‘ah committee at its head office. Such committees may consist of three persons, a Shari‘ah expert, bank’s law officer and a senior officer drawn from banking operations. In case of need, the Shari‘ah committees of the financial institutions may seek guidance in writing from the national Shari‘ah advisory board.
Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.
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