1
WHY DO WE NEED TO STUDY ISLAMIC
BANKING ?
Objectives
2
1.
To refer Qura’nic verses describing “Riba”
2.
To refer Qura’nic verses describing “Qard”
3.
To refer Hadith defining “Riba”
4.
To describe plain understanding regarding “Qard” in the light of referred
qura’nic verses & hadiths.
5.
To describe “Qard” based conventional banking practices
6.
To refer Qura’nic verses describing “Tijarah”
7.
To refer Qura’nic verse describing “Dayn”/ debt.
8.
To describe difference between “Qard” and “Tijarah” in the light of referred
qura’nic verses.
9.
To describe how “Dayn” & “Tijarah” concepts used to establish six pillars as
basis for practicing Islamic financing transactions.
11. To describe permissibility of Islamic Banking practices by OIC Fiqh Academy.
To describe permissibility of Islamic Banking under Pakistani laws of Banking.
12. To describe international standardization for practicing Islamic modes of
financing.
3
َ َ‫ث ُ َّم َجعَ ْلن‬
‫علَى ش َِريعَ ٍة ِم َن ْاْل َ ْم ِر فَات َّ ِب ْع َها َو ََل‬
َ ‫اك‬
َ ‫ين ََل يَ ْعلَ ُم‬
َ ‫تَت َّ ِب ْع أ َ ْه َواء الَّ ِذ‬
‫ون‬
Then We have put you on a certain way of the Matter
(i.e. the religion); so follow it, and do not follow the
desires of those who do not know.
Verse 18 Surah –Al-Jathiyah
Why we need to understand
Islamic Banking
Banking as defined in The Banking Companies
Ordinance 1962, means the accepting, for the
purpose of lending or investment, of deposits of
money from the public, repayable on demand or
otherwise, and withdraw able by cheque, draft,
order or otherwise;
Based on this definition, lending of money is done by
a banking company to earn interest. However, there
are verses of Holy Quran which do not allow this
practice.
4
Qard based verses
5
ۖ ‫عش ََر نَ ِقيبًا‬
‫َولَقَ ْد أ َ َخذَ ه‬
َ ‫َّللاُ ِميثَاقَ بَ ِني ِإ ْس َرا ِئي َل َوبَعَثْنَا ِم ْن ُه ُم اثْن َْي‬
‫ص ََلة َ َوآت َ ْيت ُ ُم ه‬
‫الز َكاة َ َوآ َم ْنت ُ ْم‬
‫َوقَا َل ه‬
‫َّللاُ ِإنِي َمعَ ُك ْم ۖ لَئِ ْن أَقَ ْمت ُ ُم ال ه‬
‫ع ْن ُك ْم‬
ْ ‫ع هز ْرت ُ ُمو ُه ْم َوأ َ ْق َر‬
ً ‫َّللا قَ ْر‬
ُ ‫ِب ُر‬
َ ‫سنًا ََل ُ َك ِف َر هن‬
َ ‫س ِلي َو‬
َ ‫ضا َح‬
َ ‫ضت ُ ُم ه‬
ٍ ‫س ِيئَاتِ ُك ْم َو ََل ُ ْد ِخلَنه ُك ْم َجنها‬
‫ار ۚ فَ َم ْن َكفَ َر بَ ْع َد‬
ُ ‫ت ت َ ْج ِري ِم ْن ت َ ْحتِ َها ْاَل َ ْن َه‬
َ
َٰ
ُ
َ
ْ
َ
َ
‫ه‬
ْ
‫س ِبي ِل‬
‫ل‬
‫ض‬
‫د‬
‫ق‬
‫ف‬
‫م‬
‫ك‬
‫ن‬
‫م‬
‫ك‬
‫ل‬
‫ذ‬
َ
‫س َوا َء ال ه‬
ِ
ِ
َ
َ
ْ
Allah has made the Children of Israel take a pledge. We appointed twelve chiefs
from among them. Allah said, .I am surely with you. If you establish Salah, and pay
Zakah, and believe in My Messengers, and hold them in reverence, and advance to
Allah a goodly loan, I shall certainly write off your evil deeds, and I shall certainly
admit you into Gardens beneath which rivers flow. So, whoever from you
disbelieves after that has lost the straight path..
Verse 12 Surah-Al-Maidah
Qard based verses
6
‫ف‬
ِ ‫ص ِدقَا‬
َ ِ‫ص ِدق‬
ً ‫َّللا قَ ْر‬
ُ ‫ت َوأ َ ْق َر‬
‫ين َو ْال ُم ه‬
‫ِإ هن ْال ُم ه‬
ُ ‫ع‬
َ ُ‫سنًا ي‬
َ ‫ضا‬
َ ‫ضا َح‬
َ ‫ضوا ه‬
‫لَ ُه ْم َولَ ُه ْم أ َ ْج ٌر َك ِري ٌم‬
Surely those men who give Sadaqah (alms) and those women who
give Sadaqah and have advanced a good loan to Allah, for them it
will be multiplied, and for them there is a noble reward.
Verse 18 Surah-Al-Hadid
Qard based verses
7
ً ‫َّللا قَ ْر‬
ُ ‫ِإ ْن ت ُ ْق ِر‬
‫ضا ِع ْفهُ لَ ُك ْم َويَ ْغ ِف ْر لَ ُك ْم ۚ َو ه‬
َ ُ‫سنًا ي‬
َ ‫ضا َح‬
ُ‫َّللا‬
َ ‫ضوا ه‬
‫ور َح ِلي ٌم‬
َ
ٌ ‫ش ُك‬
If you advance a good loan to Allah, He will multiply it for you, and
will forgive you. And Allah is Appreciative, Forbearing,
Verse 17 Surah-Al-Taghabn
‫‪8‬‬
‫‪Qard based verses‬‬
‫صفَهُ َوثُلُثَهُ‬
‫ِإ هن َرب َهك يَ ْعلَ ُم أَنه َك تَقُو ُم أ َ ْدن ََٰى ِم ْن ثُلُثَي ِ الله ْي ِل َونِ ْ‬
‫َو َ‬
‫ع ِل َم أ َ ْن لَ ْن‬
‫طا ِئفَةٌ ِم َن اله ِذ َ‬
‫ين َمعَ َك ۚ َو ه‬
‫ار ۚ َ‬
‫َّللاُ يُقَ ِد ُر الله ْي َل َوالنه َه َ‬
‫ع ِل َم أ َ ْن‬
‫علَ ْي ُك ْم ۖ فَا ْق َر ُءوا َما ت َيَ ه‬
‫ت ُ ْح ُ‬
‫آن ۚ َ‬
‫اب َ‬
‫صوهُ فَت َ َ‬
‫س َر ِم َن ْالقُ ْر ِ‬
‫سيَ ُك ُ‬
‫ون‬
‫ون يَ ْ‬
‫ض يَ ْبتَغُ َ‬
‫ض ِربُ َ‬
‫ض َٰى ۙ َوآخ َُر َ‬
‫ون فِي ْاَل َ ْر ِ‬
‫ون ِم ْن ُك ْم َم ْر َ‬
‫َ‬
‫س ِبي ِل ه ِ‬
‫ض ِل ه ِ‬
‫س َر‬
‫ِم ْن فَ ْ‬
‫ون يُقَا ِتلُ َ‬
‫َّللا ۙ َوآخ َُر َ‬
‫َّللا ۖ فَا ْق َر ُءوا َما تَيَ ه‬
‫ون ِفي َ‬
‫ص ََلة َ َوآتُوا ه‬
‫سنًا ۚ‬
‫َّللا قَ ْر ً‬
‫الز َكاة َ َوأ َ ْق ِر ُ‬
‫ضوا َه‬
‫ِم ْنهُ ۚ َوأَقِي ُموا ال ه‬
‫ضا َح َ‬
‫َّللا ُه َو َخي ًْرا َوأ َ ْع َ‬
‫َو َما تُقَ ِد ُموا َِل َ ْنفُ ِس ُك ْم ِم ْن َخي ٍْر ت َ ِجدُوهُ ِع ْن َد ه ِ‬
‫ظ َم‬
‫َّللا َ‬
‫ور َر ِحي ٌم‬
‫َّللاَ ۖ ِإ هن َه‬
‫أ َ ْج ًرا ۚ َوا ْست َ ْغ ِف ُروا ه‬
‫غفُ ٌ‬
‫‪Verse 20 Surah-Al-Muzammil :‬‬
Qard based verses
9
Your Lord knows that you stand (in prayer) for nearly two thirds of
the night, and (at times) for half of it, and (at times) for one third of
it, and (so do) a group of those who are with you. And Allah
measures the night and the day. He knows that you (O Muslims,)
cannot do it in regular way; therefore He turned to you in mercy.
Now, recite as much of the Qur‘an as is easy (for you). He knows that
some of you may be sick, and others traveling in the land, seeking
the grace of Allah, and yet others fighting in Allah‘s way. Therefore,
recite as much of it as is easy. And establish Salah, and pay Zakah,
and advance to Allah a goodly loan. And whatever good you will
send ahead for your own-selves, you will find it with Allah much
better in condition, and much greater in reward. And seek
forgiveness from Allah. Indeed Allah is Most-Forgiving, VeryMerciful.
Verse 20 Surah-Al-Muzammil :
Verse on “Riba”
‫َوأ َ َح هل َّللاُ ْالبَ ْي َع َو َح هر َم ا ِلربَا‬
Allah has permitted sale, and prohibited riba
Part of verse 275 Surah Al-Baqara
10
Riba based verses
11
‫َّللا َو َما آت َ ْيتُم ِمن‬
ِ َّ ‫اس فَ ََل يَ ْربُوا ِعن َد‬
ِ َّ‫َو َما آت َ ْيتُم ِمن ِربًا ِليَ ْربُ َواْ فِي أ َ ْم َوا ِل الن‬
ْ ‫َّللا فَأ ُ ْولَ ِئ َك ُه ُم ا ْل ُم‬
َ ُُ‫ض ِع‬
َ ‫َز َكا ٍة ت ُ ِريد‬
O ‫ون‬
ِ َّ َ‫ُون َو ْجه‬
Whatever Riba (increased amount) you give, so that it
may increase in the wealth of the people, it does not
increase with Allah; and whatever Zakah you give,
seeking Allah‘s pleasure with it, (it is multiplied by
Allah, and) it is such people who multiply (their
wealth in real terms).
Verse 39 Surah-Ar-Rum
Riba based verses
‫ص ِ ِّد ِه ٍْم عَن‬
َ ‫ٍَو ِب‬
ٍ ِ ‫أ َ ْم َوا ٍَل النَّا‬
‫س‬
12
ُ ‫فَ ِب‬
ٍ‫علٍَْي ِه ٍْم َط ِيِّبَاتٍ أ ُ ِحلَّتٍْ لَ ُه ْم‬
ٍَ ‫ن الَّ ِذ‬
ٍَ ‫ظ ْلمٍ ِ ِّم‬
َ ‫ين َهادُوٍاْ َح َّر ْمنَا‬
‫ع ْن ٍهُ َوأ َ ْك ِل ِه ٍْم‬
ٍِّ ‫س ِبي ٍِل‬
َ ْ‫الربَا َوقَ ٍْد نُ ُهوٍا‬
َ
ِّ ِ ‫ َوأ َ ْخ ِذ ِه ٍُم‬O ‫يرا‬
ً ِ‫للاِ َكث‬
O ‫ما‬
ٍَ ‫اط ٍِل َوأ َ ْعت َ ْدنَا ِل ْلكَا ِف ِر‬
َ ‫ين ِم ْن ُه ٍْم‬
ِ َ‫ِبا ْلب‬
ً ‫عذَابًا أ َ ِلي‬
So, because of the transgression of those who became Jews,
We prohibited for them good things which were made lawful
for them earlier and for their preventing (people), very often,
from the way of Allah, and for their charging Riba (usury or
interest) while they were forbidden from it, and for their
devouring of the properties of the people by false means. We
have prepared, for the disbelievers among them, a painful
punishment. Verse 160-161 Surah-e-AlNisa
Riba based verses
13
ْ َ ‫الربَا أ‬
َ ‫ضعَافًا ُّم‬
َ ‫يَا أَيُّ َها الَّ ِذ‬
‫َّللا لَعَلَّ ُك ْم‬
َ ‫ضا‬
ِ ْ‫ين آ َمنُواْ َلَ تَأ ْ ُكلُوا‬
َ ْ‫عَُةً َواتَّقُوا‬
َ ‫ت ُ ُْ ِل ُح‬
O ‫ون‬
O you who believe, do not eat up the amounts acquired
through Riba (interest), doubled and multiplied. Fear Allah, so
that you may be successful.
Verse 130 Al-e-Imran
Riba based verses
14
ُ َّ‫ون ِإَلَّ َك َما يَقُو ُم الَّ ِذي يَت َ َخب‬
َ ‫الربَا َلَ يَقُو ُم‬
َ ُ‫ين يَأ ْ ُكل‬
َ ‫الَّ ِذ‬
ُ ‫ش ْي َط‬
‫ان ِم َن‬
َّ ‫طهُ ال‬
ِ ‫ون‬
‫الربَا‬
ِ ‫الربَا َوأ َ َح َّل َّللاُ ا ْلبَ ْي َع َو َح َّر َم‬
ِ ‫ا ْل َم ِس َذ ِل َك ِبأَنَّ ُه ْم قَالُواْ ِإنَّ َما ا ْلبَ ْي ُع ِمثْ ُل‬
‫َّللا َو َم ْن‬
ِ ‫ف َوأ َ ْم ُرهُ ِإلَى‬
َ ‫فَ َمن َجا َءهُ َم ْو ِع َظةٌ ِمن َّر ِب ِه فَانت َ َهى فَلَهُ َما‬
َ َ ‫سل‬
َ ‫اب النَّ ِار ُه ْم ِفي َها َخا ِلد‬
O ‫ُون‬
ْ َ ‫عَا َد فَأ ُ ْولَـ ِئ َك أ‬
ُ ‫ص َح‬
Those who take riba (usury or interest) will not stand but as stands the
one whom the demon has driven crazy by his touch. That is because they
have said: .Sale is but like riba.‘‘, while Allah has permitted sale, and
prohibited riba. So, whoever receives an advice from his Lord and desists
(from indulging in riba), then what has passed is allowed for him, and his
matter is up to Allah. As for the ones who revert back, those are the people
of Fire. There they will remain forever.
Verse 275 Al-Baqarah
Riba based verses
15
O ‫ب ُك َّل َكَُّ ٍار أ َثِ ٍيم‬
ِ ‫ص َدقَا‬
َّ ‫ق َّللاُ ا ْل ِربَا َويُ ْر ِبي ال‬
ُ ‫يَ ْم َح‬
ُّ ‫ت َوَّللاُ َلَ يُ ِح‬
Allah destroys riba and nourishes charities, and Allah does not
like any sinful disbeliever.
Verse 276 Al-Baqara
َ ِ‫الربَا ِإن كُنتُم ُّم ْمْؤ ِمن‬
َ ‫يَا أَيُّ َها الَّ ِذ‬
O ‫ين‬
ِ ‫ي ِم َن‬
َ ‫َّللا َو َذ ُرواْ َما بَ ِق‬
َ ْ‫ين آ َمنُواْ اتَّقُوا‬
O you who believe, fear Allah and give up what still remains of
riba, if you are believers.
Verse 278 Al-Baqara
Riba based verses
16
‫وس‬
ِ ‫ب ِم َن‬
ُ ‫َّللا َو َر‬
ٍ ‫فَ ِإن لَّ ْم ت َ ُْعَلُواْ فَأ ْ َذنُواْ ِب َح ْر‬
ُ ‫سو ِل ِه َو ِإن ت ُ ْبت ُ ْم فَلَ ُك ْم ُر ُمْؤ‬
َ ‫ون َوَلَ ت ُ ْظلَ ُم‬
َ ‫أ َ ْم َوا ِل ُك ْم َلَ ت َ ْظ ِل ُم‬
O ‫ون‬
But if you do not (give it up), then listen to the declaration of war from
Allah and His Messenger. However, If you repent, yours is your principal.
Neither wrong, nor be wronged.
Verse 279 Al-Baqara
َ ‫َو ِإن َك‬
‫ص َّدقُواْ َخ ْي ٌر لَّ ُك ْم ِإن كُنت ُ ْم‬
ُ ‫ان ذُو‬
َ َ ‫س َر ٍة َوأَن ت‬
ْ ‫ع‬
َ ‫س َر ٍة فَنَ ِظ َرةٌ ِإلَى َم ْي‬
َ ‫ت َ ْعلَ ُم‬
O ‫ون‬
If there is one in misery, then (the creditor should allow) deferment till
(his) ease, and that you forgo it as alms is much better for you, if you really
know.
Verse 280 Al-Baqara
Riba based verses
17
َ‫سبَتْ َو ُه ْم َل‬
َ ُ‫َواتَّقُواْ يَ ْو ًما ت ُ ْر َجع‬
ِ ‫ون فِي ِه ِإلَى‬
َ ‫َّللا ث ُ َّم ت ُ َوفَّى ُك ُّل نَ ُْ ٍس َّما َك‬
َ ‫يُ ْظلَ ُم‬
O ‫ون‬
Be fearful of a day when you shall be returned to Allah, then every person
shall be paid, in full, what he has earned, and they shall not be wronged.
Verse 281 Al-Baqara
Hadith to define Riba
“Every loan that draws any premium is Riba”.
[Hadith is reported by Hazrat Harith Ibn Abi Usamah in his Musnad
(See Supreme Court Judgment December 23, 1999)]
18
Evidence of Saving from
Quran
19
ِ ‫هت ه‬
ُ ‫بَ ِقي‬
‫يظ‬
َ ِ‫َّللا َخي ٌْر لَ ُك ْم ِإ ْن ُك ْنت ُ ْم ُمؤْ ِمن‬
ٍ ‫ين ۚ َو َما أَنَا َعلَ ْي ُك ْم ِب َح ِف‬
What remains with Allah is better for you if
you are believers, and I am not a keeper
over you.
Verse 86 Surah-Hud
Verse on “Tijarah”
‫َوأ َ َح هل َّللاُ ْالبَ ْي َع َو َح هر َم ا ِلربَا‬
Allah has permitted sale, and prohibited riba
Part of verse 275 Surah Al-Baqara
20
Verse on “Tijarah”
21
َ ‫اط ِل ِإَلَّ أَن تَك‬
َ ‫يَا أَيُّ َها الَّ ِذ‬
‫ُون‬
ِ َ‫ين آ َمنُواْ َلَ تَأ ْ ُكلُواْ أ َ ْم َوالَ ُك ْم بَ ْينَ ُك ْم ِبا ْلب‬
َ
ُ
َ ‫َّللا َك‬
َّ
ُ
‫ان ِب ُك ْم‬
‫ن‬
‫إ‬
‫م‬
‫ك‬
‫س‬
ُ
‫ن‬
‫اض ِمن ُك ْم َوَلَ ت َ ْقتُلُواْ أ‬
َ
ٍ ‫ارةً عَن ت َ َر‬
َ ‫تِ َج‬
ْ
ِ
َ
‫َر ِحي ًما‬
O you who believe, do not devour each other‘s property by false
means, unless it is trade conducted with your mutual consent. Do
not kill one another. Indeed, Allah has been Very-Merciful to you.
Part of verse 29 Surah Al-Nisa’
Verse on “Dayn”
22
‫س ًّمى فَا ْكتُبُوهُ َو ْليَ ْكتُب به ْينَ ُك ْم‬
َ ‫يَاأَيُّ َها الهذِينَ آ َمنُواْ ِإذَا ت َ َدايَنتُم ِب َدي ٍْن ِإلَى أ َ َج ٍل ُّم‬
‫ب ِب ْالعَ ْد ِل‬
ٌ ‫َكا ِت‬
O you who believe, when you transact a debt payable at a specified
time, put it in writing, and let a scribe write it between you with
fairness.
Part of verse 282 Surah Al-Baqara
Difference between Qard and Dayn 23
‫س ًّمى فَا ْكتُبُوهُ َو ْليَ ْكتُب به ْينَ ُك ْم‬
َ ‫يَاأَيُّ َها اله ِذ‬
َ ‫ين آ َمنُواْ ِإ َذا ت َ َدايَنتُم ِب َدي ٍْن ِإلَى أ َ َج ٍل ُّم‬
‫ب ِب ْالعَ ْد ِل‬
ٌ ِ‫َكات‬
O you who believe, when you transact a debt payable at a specified time,
put it in writing, and let a scribe write it between you with fairness.
Part of Verse 282 Surah-AlBaqarah
Difference between Qard and Dayn 24
َ ‫اط ِل ِإَلَّ أ َن تَك‬
َ ‫يَا أَيُّ َها الَّ ِذ‬
‫ُون‬
ِ َ‫ين آ َمنُواْ َلَ تَأ ْ ُكلُواْ أ َ ْم َوالَ ُك ْم بَ ْينَ ُك ْم ِبا ْلب‬
َ ‫س ُك ْم ِإ َّن َّللاَ َك‬
‫ان ِب ُك ْم َر ِحي ًما‬
َ ُُ‫اض ِمن ُك ْم َوَلَ ت َ ْقتُلُواْ أَن‬
ٍ ‫ارةً عَن ت َ َر‬
َ ‫ِت َج‬
O you who believe, do not devour each other‘s property by
false means, unless it is trade conducted with your mutual
consent. Do not kill one another. Indeed, Allah has been VeryMerciful to you.
Part of verse 29 Surah Al-Nisa’
Permissibility of Islamic Banking 25
by International Islamic Fiqh Academy
How Islamic Fiqh Academy established?
Resolution No.8/3-C, (I.S.) adopted by the Third Islamic Summit
Conference, held in Makkah Al-Mukarramah and Taif called for the
establishment of an Islamic Fiqh Academy (Jurisprudence)
Academy.
Permissibility of Islamic Banking 26
by International Islamic Fiqh Academy
Objectives of Islamic Fiqh Academy:
1. To achieve the theoretical and practical unity of the Islamic
Ummah by striving to have Man conform his conduct to the
principles of the Islamic Sharia at the individual, social as well as
international levels.
2. To strengthen the link of the Muslim community with the Islamic
faith.
3. To draw inspiration from the Islamic Sharia, to study
contemporary problems from the Sharia point of view and to try to
find the solutions in conformity with the Sharia through an
authentic interpretation of its content.
27
Resolution No. 10 (10/2)
concerning transactions with banks dealing with interest
and dire need for financial transactions with Islamic
financial institutions based on Shari’ah rulings
Bismillah-hiRahman NirRaheem
Praise be to Allah, the Lord of the Universe, and Prayers and
Blessings be upon Sayyidina Muhammad, the last of the Prophets,
and upon his Family and his Companions
Passed by the Council of the Islamic Fiqh Academy, during its second
session from 10 to 16 Rabiul Thani 1406 H (22-28 December 1985);
Having reviewed numerous studies on modern financial
28
transactions; and thoroughly discussing all aspects thereof, because
of its deviation from directives of the Holy Book, which clearly
prohibits Riba (usury), be it total or partial, and commands us to
repent from it, and permits us to recover only the principal of loans,
no more and no less, whether it is a big amount or a small one, and
warns us of a war waged by Allah and His Prophet against usurers;
RESOLVES
First: Any increase or interest on a debt which has matured, in
return for an extension of the maturity date, in case the borrower is
unable to pay and the increase (or interest) on the loan at the
inception of its agreement, are both forms of usury which is
prohibited under Shari'ah.
Second: The alternative which guarantees the cash flow and
financial support for the commercial activity in a form acceptable to
Islam, is to trade with each other in conformity with Shari'a
principles.
29 to
Third: The Academy invites Governments of Islamic countries
encourage the financial institutions which operate in accordance
with the principles of Islamic Shari'ah, and to enable them to
operate in every Muslim country, so that they may respond to the
needs of Muslims and a Muslim does not have to live in
contradiction between the demands of his faith and the realities of
life.
Pillars of Islamic Banking practices 30
1st
• No financing allowed of activities that are prohibited by Shari’ah. Thus pork & wine
can not be financed.
2nd
• Prohibition of Interest (Riba). Thus Islamic Banking institutions will never execute
any financing transactions, based on lending & borrowing “money”.
3rd
• Risk taking/sharing by the financier, being the owner of assets/commodities based
on Hadith Mubarakah.
4th
• Sanctity of contracts, permissible under shari’ah rulings. Thus only “Tijarah” based
contracts will be extended by Islamic Banking Institutions to earn “halal” profits.
5th
• Materiality/economic purpose. Thus Islamic Banking Institutions will have to make
sure that their transactions do serve “Economic purpose”.
6th
• Fairness/no exploitation. Thus parties to the contracts will not enter any transaction
which has any element of “Gharar-e-Kaseer / Huge uncertainty”.
31
Permissibility of Islamic Banking under
Banking Companies Ordinance 1962
In 1984, sub section of section 7(I) to Banking Companies
Ordinance, 1962, was inserted in the following manner to allow
financial transactions based on Shari’ah rulings under banking laws
of Pakistan.
Purchase or acquisition in the normal course of its banking business
of any property, including commodities, patents, designs,
trademarks and copyrights with or without buy-back arrangements
by the seller, or for sale in the form of hire-purchase or on deferred
payment basis with mark-up or for leasing or licensing or for rent
sharing or for any other mode of financing;
Over the globe standardisation
of Islamic Banking practices
32
The Accounting and Auditing Organization for Islamic Financial
Institutions(AAOIFI) is an Islamic international autonomous not-forprofit corporate body that prepares Shari'ah standards accounting,
auditing, governance and ethics for Islamic financial institutions and
the industry. AAOIFI was established in accordance with the
Agreement of Association which was signed by Islamic financial
institutions on 1 Safar, 1410H corresponding to 26 February, 1990
in Algiers. Then, it was registered on 11 Ramadan 1411
corresponding to 27 March, 1991 in the State of Bahrain.
Over the globe standardisation
of Islamic Banking practices
33
As an independent international organization, AAOIFI is supported
by institutional members (200 members from 45 countries, so far)
including central banks, Islamic financial institutions, and other
participants from the international Islamic banking and finance
industry, worldwide.
AAOIFI has gained assuring support for the implementation of its
standards, which are now adopted in the Kingdom of Bahrain, Dubai
International Financial Centre, Jordan, Lebanon, Qatar, Sudan and
Syria. The relevant authorities in Australia, Indonesia, Malaysia,
Pakistan, Kingdom of Saudi Arabia, and South Africa have issued
guidelines that are based on AAOIFI’s shari’ah standards.
Establishment of Islamic Banking
Department at State Bank of Pakistan
34
Alhamdulillah, Islamic Banking Department was established on 15th
September, 2003 and has been entrusted with the task of promoting
& developing the Shari’ah Compliant Islamic Banking as a parallel
and compatible banking system in the country.
Islamic Banking is a high priority area for State Bank of Pakistan.
Steps are being taken to make Islamic banking industry in Pakistan
robust enough to offer a viable alternative to conventional banking,
should the market decide that Pakistan should have an exclusively
Islamic banking system in the country.
State Bank of Pakistan wants to develop a progressive and sound
Islamic banking system that is in line and compatible with the global
financial sector, providing innovative Shari’ah compliant products
and services so as to achieve equitable economic growth.