THIS is with reference to the thoughtprovoking article ‘Is Islamic banl(ing Islamic?’ (June 6), which discussed the growth of Islamic banking and its promotion in Pakistan under the banner of the religion. The current Islamic banl(ing framework represents an initial step towards potential Islamisation of the financial sector, and it remains, even after more than two decades, far removed from the true spirit and principles of Islamic finance.
Unfortunately, the key stakeholders appear to have little interest in introducing meaningful reforms that would actually align banl(ing practices with the genuine religious concepts of trade, risk-sharing and partnership.
The architects of the existing system inPakistan have developed astructurein which Shariah Boards are headed by scholars trained in seminaries. While their religious expertise is important, the focus appears to be on validating the existing banking products rather than fundamentally transforming them in accordance with Islamic principles.
As someone worl(ing in the corporate sector and regularly dealing with Islamic banks, I have observed that customers often bear additional costs in the name of Shariah compliance. These include extra documentation, higher stamp duties on multiple agreements designed to structure transactions, and, in many cases, higher financing costs compared to conventional banking tools.
Furthermore, settlement and repayment processes in Islamic banl(ing can take several days to complete. During this period, the profit calculation continues despite the customer’s intention to settle the obligation. In contrast, under conventional banking arrangements, interest typically ceases once the repayment amount is credited to the lender’s account. Such operationalinefñeienciesincrease the financial burden on customers and raise questions about fairness and transparency.
Lil(e many institutions in Pakistan, Islamic banl(ing is more of a commercial brandingexercise than agenuine effort to establish a financial system based on Islamic economic principles.
Unless substantial reforms are undertaken, the industry may continue to offer the appearance of Shariah compliance without delivering its intended substance.
Faisal Habib Karachi