Khawaja Ehsan Elahi
Head of Product Development and Shari’ah Support
Askari Bank (Ikhlas Islamic Banking)
Recently, Federal Shari’ah Court of Pakistan has given its judgement on the Riba case. The verdict reaffirmed the historic judgement on interest first given in 1991. But, the subsequent appeals process reopened the case. Concerns about jurisdiction further delayed the implementation of the historic judgement and delayed the case for several years. Now, finally, the verdict has come. The verdict has declared conventional banking interest to be Riba, which is prohibited in Islamic sources of knowledge categorically including Qur’an and Hadith. The judgement has also asked the government to transform the economic system on interest free basis within a period of 5 years to fulfil the constitutional requirement as well as completing the required implementation of the judgement.
Islamic Economics Project is making a humble effort to collect the views of Shari’ah scholars, regulators, practitioners, lawyers and academic experts to deliberate on the future course of action and generate ideas and debate on how to make this transformation possible.
In this regard, we got the chance to get reaction and response from Khawaja Ehsan Elahi. We hope that the views expressed and shared with relevant audience and stakeholders will generate practicable ideas and keep the momentum towards achieving the end goal of an economy that is in compliance with Shari’ah and is able to utilize the instruments and institutions in the Islamic economic teachings.
Question: What is your take on the decision by Federal Shari’ah Court of Pakistan on Riba?
Khawaja Ehsan Elahi: The decision is good, but, it has come late. On the positive side, it is the right decision. Implementation is critical. The same verdict has been given earlier as well. But, it was not implemented and then eventually, delaying tactics were used to put the issue on the back burner. Therefore, early steps are necessary by the government and regulators to exhibit seriousness and commitment now.
Question: Do you think that it is possible to implement the verdict on transformation of economy on interest free basis in 5 years?
Khawaja Ehsan Elahi: It is very much possible. It will be wrong to assume that since the verdict has taken too long, there is a very complex and daunting process involved to achieve transformation. It depends on political will and committed efforts.
Islamic finance is part and parcel of the country’s financial system with 20% market share in banking, more than 50% share in housing finance and close to 50% share in asset management. In commercial finance, only restructuring and conversion is required.
Question: What are the measures which can be taken to implement the verdict on transformation of economy on interest free basis in 5 years?
Khawaja Ehsan Elahi: A list of priorities must be set first. Commercial banking is easier to transform. The state owned institutions are also easier to reform since government is the major sponsor of those institutions. State owned enterprises shall be reformed to ensure that they use Islamic modes of financing. A gradual step-by-step approach can cut the long journey in milestones. Momentum can be picked up if some early steps are taken now.
Question: What are the important obstacles that can be encountered along the way of transformation process?
Khawaja Ehsan Elahi: There are stakeholders whose business and employment will be at stake and they may resist change. But, they can easily be convinced to join the transformation movement which will give them long term benefits in even financial and professional terms, if the spiritual benefits are set aside for the moment to explain this point.
Quite a big majority of people do not bank in order to avoid Riba. Even if they need banking channel, they open checking accounts rather than non-checking accounts. In order to mobilize more deposits especially on long term basis, Islamic banking provides a useful solution.
Furthermore, the demand for jobs in the Islamic banking sector is growing at a much faster pace. Further growth in Islamic banking will provide more opportunities of employment in all areas of expertise including supply chain, software development, information technology, data science, advertising, human resource and marketing to name a few.
Early movers who achieve adequate skills level and certifications would benefit from this growing industry which has demand for Shari’ah experts, trainers, teachers, researchers, auditors, risk managers and business developers.
Therefore, instead of resisting change, it is in the best interest of conventional interest-based banks and professionals working in such institutions to embrace change and be part of this positive change as professionals and customers.
Disclaimer: The views shared by the interviewee in this forum are personal opinions and judgements and do not represent the official representation of the principal institution with which they are affiliated.