Desirable Strategy for Isalmization

The lessons to be learnt from the past experience, while designing a future strategy to further the process of Islamization, are quite evident from the preceding discussion. The success of any future efforts would depend critically on avoiding the pitfalls which were experienced in the past efforts.

Let us outline the broad features of a strategy that holds the promise of success in truly implementing an Islamic system of finance. These are as follows:

1. The process has to be guided by a basic legislative effort covering all the essential elements of the proposed programme;
2. The legislation would define Riba and prohibit transactions connected with Riba;
3. The application of the law would be unqualified and without any exception; thus the entire financial sector, covering banking, government finance and foreign transactions will be covered in its ambit;
4. In view of relative difficulty in cleansing the above three classes of transactions, a phasing may be allowed which will be restricted to 12 months;
5. Given the unqualified and non-exceptional nature of the proposed law, even the existing relations will have to be converted into permissible forms, for which a suitable time frame, within the phasing period, will be allowed;
6. The law should also provide for the constitution of a Shari'ah Board which would assist the SBP in formulation of permissible modes of financing. Such modes, specified with the prior approval of the Board, will only be illustrative and no restrictions will be placed on banks and financial institutions to design modes of financing which are free of Riba'
7. A major portion of the law will have to be devoted to a plan of restructuring of the fiscal policy comprising a scheme for the privatization of public sector assets and use of its proceeds for the settlement of outstanding stock of public debt.

The proposed strategy is based on a clear recognition of the scope implied by the prohibition of Riba. This is critical, for otherwise the solution would continue to elude us. A large body of literature, including reports submitted by the Committees and Commissions constituted by the Government, exists that demonstrates that such an approach will not pose insurmountable problems.

Source: Experiences in Islamic Banking: A Case Study of Islami Bank Bangladesh, Institute of Policy Studies. Republished with permission.