Mufti Taqi Usmani’s Special
Interview to Dharb-I-Mu’min
Interview Panel: Mufti Abu Lubaba, Maulvi
Safeer Ahmed, Maulvi Mehboob-ur-Rahman,
Maulvi Gul Shahzad, Maulvi Naimat-uulah &
Maulvi Anees Rasheed
Issue #25, 14-20 June, 2002
Dharb-I-Mu’min: In our country, no attentions usually paid on Islamic economics and
finance. What prompted you to work in this field?
Mufti Taqi ‘Usmani: During the days of my education when I was a student of Dars-INizami, my father Mufti Muhammad Shafi was struggling for enforcement of Islamic law
and Islamic mode of living in the country. In this connection, many people would visit
him. As a child, I would see all this and felt that there was an acute need to work in that
direction. People would put questions to my father and many issues would come to light
to light. At that time, I felt that in deeni madaris (religious institute), there was a lack
awareness and research required for explaining the ruling of Shari’ah regarding those
issues. Since childhood, I believed that we should have a positive program to show to the
world before we launch a campaign for implementation of Islamic system. Since the law
and system prevailing in the world was every inch man-made, I strongly felt a desire to
introduce the Islamic law. The Islamic law is eternal and all-embracing and nobody can
change it, but I thought that the manner to introduce it should be people-friendly So that
the can easily understand what the Islamic law is. On the other hand, I realized that
finance was the biggest problem of the world. It is the basis of all the economic wars, the
basis of duel between communism and capitalism and the basis on which the world
powers make their plans. So, I felt a desire that I should understand the current
financial system and then present Islam’s economic system as a substitute. Therefore,
when I started teaching after completing my dars-I-nisami, I made a resolve to learn the
modern science of finance and use my capabilities for the service of Islam.
I started work under unfavorable condition with almost no resources available. I would
give lessons for five hours and wrote fat was for three hours. In the meantime, I was
working on Islamic jurisprudence. After the Asr Prayer, I would board a bus to go to the
city. In those days, buses were not easily available and I had to change two buses. I
would return at about 11 pm. During this period, I would study the sciences related to
finance. Besides, I used to spend time in library. At that time, I was also working on a
book “From the bible to the Quran” and some of my time was dedicated for it.
As initiated work on finance, I felt that the biggest fault in the prevailing financial
system was Riba (interest) as described in the verses of Holy Quran. At the age of 20, I
wrote my third book” Commercial Interest”. Prior to that, I had written two books.
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By the grace of Allah Almighty, I got opportunities to bring out my research on finance.
Meanwhile, some Islamic banks were established and they contacted me to seek my
advice. In this way, I made my way in this field.
Dharb-I-Mu’min: When you stepped in this field, no considerable work had been done
on this subject especially in the subcontinent. By the grace of Allah, your struggle
resulted in the evolution and revival of Islamic finance. What circumstances did you pass
through during this period?
Mufti Taqi ‘Usmani: The most complicated phase of my work was to draw from the
sources of Shari’ah the rulings about various Problems and issues regarding the modern
trade and finance. This was difficult since there were no books or literature available
giving precise rulings on those issues, and I was afraid of lopsidedness on my part. But
with the help of Allah Almighty and the blessing of our Shari’ah, whenever I tried to
research on an issue, I found guidance in the books of our predecessors. Though it was an
arduous task, I did get guidance from the predecessors.
I would not arrive at a decision unless I got guidance from the predecessors or at least
found a principal that led me to draw the ruling. Allah’s help was there at every stage of
the research. I would not feel complacent with my research until I consult other scholars.
I would not publish my Work until it was scrutinized by them.
Some of the Ulama in the Committee of Islamic Jurisprudence are of very high caliber in
terms of their knowledge and piety. I would take the opportunity to present my research
work before them. So, I was satisfied all the way that all my writings were scrutinized
and upheld by Ulama.
Dharb-I-Mu’min: Would you please tell us about your prolonged struggle at
government level and inside the court?
Mufte Taqi ‘ Usmani:
I tell you the story briefly. At first, I got opportunities to work
in the field of finance as a member of Islamic Ideological Council (IIC), which Has been
formed during the tenure of late President Zia-ul-Haq. We had two foremost tasks:
(1) To reform the law (2) To reform the financial system. It was hitherto said that there
was no infrastructure for the interest-free finance. We, in the IIC, first tried to present a
structure of Islamic finance. For that purpose, a panel of economists was formed and
finally a report was prepared. It was the fist time Islamic banking system was introduced
in Pakistan. The report on this subject and, by the grace of Allah, I got opportunities to
take an active part in its preparation.
The repot was sent to the government. It was the time when the entire environment was
dominated by secular-minded government functionaries who favored secular financial
system. On the one hand, there was President’s order to implement the report and on the
other, there was Finance Minister’s argument that the implementation would create a lot
of problems. He tampered with the report in such a way that the interest-based system
would continue under the garb of interest-free system, and no actual change would be
brought. Therefore, a formal order was issued hat debarred the banks from dealing in
interest. But at the same time, the alternate system, promulgated by the government,
incorporated only a few provision of our report, and the essence of the report was
neglected with the result that the title was “interest-free” but in fact the system was
interest-based.
We protested against it. There was public protest too. So, we had meeting with the
finance minister and other people in the presence of President Zia. The meetings
sometimes resulted in a partial reform and sometimes ended inconclusive. That situation
persisted for a long time.
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President Zia passed away but we continued our struggle and put our demands to the
succeeding government. In the long run, a commission, named Islamization of Economic
Commission, was formed to deliberate upon the issue. I was a member of that
commission. We compiled a comprehensive report. The report described the rules
regulation required by the State Bank for regulating the whole system. When the matter
reached the final phase, the government was suddenly ousted. The change of government
reversed the whole progress. The commission was abolished and its report fell in a dark
chamber. Some time later, voices were raised for the Shari’ah Bill, which was passed
during the second term of Nawaz Sharif. The commission was formed again and the work
resumed. The previous report was being updated when the government appealed against
the Federal Shari’ah Court.
The Federal Shari’ah Court was assigned to hear and decide appeals against laws
repugnant to Quran and Sunnah. It was the advantage of Federal Shari’ah Court that its
decisions were not just recommendations but final verdicts to be implemented. But the
fiscal laws were excluded from the jurisdiction of Federal Shari’ah Court for a period of
ten years on the reason that change in the system needed time.
At last, after the expiry of 10 years period, petitions were filed against interest. In 1991,
The Federal Shari’ah Court delivered verdict against interest. An appeal against that
verdict was received by us at the Shari’ah Appellate Bench of the Supreme Court. It took
us 9 years to start the hearing of the appeal. It was because every time the appeal was to
be heard, the government filed a petition that it was itself working for elimination of
interest and some time should be given to it. Several times, I urged the Chief Justice for
settling the pending appeal. When Justice Ajmal Mian became the Chief Justice, he tried
to settle the backlogged cases. The appeal was also put for hearing. There was a need for
detail arguments form both sides. The bearing continued for 6 months and then the
historic verdict against interest was delivered 7 days before the end of year 2000.
We gave one and a half year time to the government to reform the system. We believed
that it might take time to change the whole system in the country and a year or so would
be required provided the government acted seriously. Last year, the government asked
for another 5-year time. There were suspicions that implementation of the verdict might
be delayed for an indefinite time. Again, the government was given one-year time and
that time is going to expire too.
Dharb-I-Mu’min: It is a Muslim country and its government is Muslim and the
majority of people want to feed their children from Halaal income, the substitute for Riba
(Interest) is available, the court has given verdict then what is the unseen power,
pressure or conspiracy hindering the elimination of this curse?
Mufti Taqi ‘Usmani:
Look, the foremost thing required for bringing the change is
firm determination. Until the people at the helm of power make a resolve to do this work,
there will be evasion even though you crate favorable conditions. There is a lack of
resolution in this matter and there are three reasons for this. The first reason is
ignorance as there is a propaganda that financial affairs cannot be run without interest.
Nobody ever bothered to see if there is any veracity in that propaganda. The second
reason is that benefits of many depend on the interest-based system. They fear that if
this system were eliminated, their benefit would suffer. That is why, they make
propaganda and the masses as well as the government get impressed by it. The third
reason is the sense of inferiority.
Personally, I think that external pressure is not responsible nor do the foreign
government have any concern with our internal system it their own benefits are not
affected. Islamic banking has emerged as a reality and even in the World Bank; research
departments are working on it. I mentioned this fact in my verdict.
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During the Zia government, it was announced that interest would not be paid. At that
time, the International Finance Corporation (IFC), a World Bank subsidiary, sanctioned
loan for a mill being established in Sindh. An IFC team came to inspect the mill and said
to the Pakistan officials that since the interest-based system was being eliminated in
Pakistan, the IFC was considering giving loans according to Islamic mode of finance. Our
officials told the IFC team that it did not need to bother. I personally believe that if there
is strong faith then there is no hindrance in convincing the foreign countries.
Loans are always subject to some stipulations and restrictions. Just add a condition that
they will sell you goods worth the amount of loan. Thus the loan would be asset-backed
and that is called Murabaha. There is no difficulty in converting an interest-based loan
into Murabaha dealing, but the only thing important is that we make a determination
and get rid of our sense of inferiority.
Our government feels shy to say to the Europeans and Americans that it would make all
the dealings under Islamic system. As I said earlier, there are three reasons: ignorance,
propaganda and sense of inferiority.
Dharb-I-Mu’min: You often undertake foreign visits. In your opinion, is there any
Islamic country going to be the first in the world to implement the Islamic system of
economy on a government level?
Mufti Taqi ‘Usmani:
Under the prevailing conditions there is only one country in
the world and that is Sudan, which has implemented the interest-free system. Not only
this, all banks and financial institution of Sudan including the central bank, claim that
they are operating on interest-free system. They have formed a committee called ‘Heyath
al Raqabat al-Shari’ah’ in the central bank. This committee is comprised of ‘Ulama who
monitor the functioning of central and all other banks and financial institutions. Iran
also claims to be a country that has implemented interest-free system of economy.
Although their some procedures are controversial, they have announced that they have
done so. In case of Malaysia, they have fifty-fifty, that is, they have 50 per cent interest
system and 50 per cent interest –free system of economy. They have a number of Islamic
banks while there are two parallel departments in the central bank. This means there
are just two-and-half countries in the world, which have implemented interest-free
system of economy. Had the efforts, made during the period of General Zia-ul-Haq, taken
seriously and in the right direction, Pakistan would have been the first country to have
implemented the interest-free system of economy. But regretfully, this could not be done
due to conspiracies and the matter remained half-way. Whatever happened in Sudan and
Iran began after Pakistan had taken initiative in this direction.
As far as possibilities and opportunities are concerned, there were far better chances in
Pakistan and there are two reasons to this effect. Firstly, the research work on the issue,
that Pakistan has done, no country has done so far. Secondly, Pakistan has the honor of
having economic experts who besides being experts in economy, also have religious
thinking and positive approach. Therefore, they have more capabilities than other
economic experts in the world. Under these circumstances, if interest-free system is
implemented in Pakistan, there are greater prospects of success as compared to other
countries. Its example can be taken in this way that wherever non-Islamic banking
system is existing, Pakistan experts are capable enough to find a solution to any problem
in this regard. The World Bank has a permanent cell that is working on Islamic Banking
and most of official in this cell are Pakistanis. Their papers prove that the knowledge and
expertise they have acquired in the field are essentials for Islamic banking.
Dharb-I-Mu’min: At a time when the entire universe is shrouded in the clouds of
interest-based economic system, does there any bank or non-banking institution exist
anywhere in the world that is operating according to Shari’ah?
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Mufti Taqi ‘Usamni:
Not too many, but there are many such institutions and most
of them are found in the Middle East while two in Pakistan. Let me tell you that
whatever number of such institutions are established in the Middle East they were set
up under the circumstances that neither their countries or central banks supported them
nor their tax system provided them nay room for better functioning. For example: There
is a law in all countries of the world where interest-based banking system is prevailing
that no bank can enter into trade whereas the Islamic banking system is based on trade.
Therefore, the Islamic banks face a lot of difficulties while dealing with such countries.
Its example can be taken this way that any interest system bank extends any loan to
anyone and takes interest on this loan then the tax is very nominal or none. But if the
same bank earns the money and profit through Islamic and Halal system, it is subjected
to heavy tax while in some case this tax is double. For this reason Islamic banks or
institutions, which are functioning under Islamic system, are forced to work under
pressure and so they have to leave their actual track of Shari’ah. Here I don’t say that all
Islamic banks and other institutions are well-established and working according to nonIslamic step, they call it a Sadaqa (charity) and if they earn any amount through nonIslamic means (when they are forced to do so) they do not include this income into their
profit or overall earning and give it as a Sadaqa (charity). Their monitors also keep an
eye on them and they tell them not to include this income into their overall earnings and
give this earning as Sadaqa.
Dharb-I-Mu’min: As you just said that there are a few Islamic banks in Sudan and Malaysia. What
are your views about the economic system that was implemented in the Islamic Emirate of
Afghanistan? Did the Islamic Emirate over approach you to seek an advice about the type of system to
be implemented I the country?
Mufti Taqi ‘Usmani:
The situation in Afghanistan was different. They had closed
all banks. That means no bank was functioning or doing any business. The reason behind
shutting down all the banks in Afghanistan was that banks were functioning on interestbased system and there was a plan that as the administration does not find any
alternative system they would not reopen these banks. For this purpose they contacted
me. In fact I also contacted the Afghan administration. A delegation comprising officials
of central bank led by bank’s vice president came here and stayed here for two or three
weeks. I apprised them of the principles of Islamic banking system. But nothing fruitful
came out because two or three weeks are not enough to bring each and every point under
discussion. There was a need that they should have some economic experts in their circle
who know the principles of banking. I later offered my services and told them that I can
come to Afghanistan with a few economic experts who would initiate and run the banks
under Islamic system and will train their men in the field. However, this plan could not
materialize and the biggest incident took place.
Dharb-I-Mu’min: There was news about a year back that some Muslim countries or big
Muslim investors (including yourself) had established a financial institution, which
would promote Islamic banking in Pakistan. What happened to that plan?
Mufti Taqi ‘Usmani:
Pakistan has many a time taken such steps. The first attempt
was in the shape of Faisal Bank. This bank was launched on the basis of Islamic system
of banking. But, gradually it changed its track and started functioning like other banks.
Second attempt was made in the shape of Al-Barraka Bank. Third attempt was made
when Meezan Bank was launched. This bank is striving to continue with its Islamic
principles and has recently obtained license of commercial bank from the State Bank of
Pakistan. Moreover, the State Bank has extended some facilities, which were not
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extended to any Islamic bank in the past. This example is a good omen. If this continues
well there is a possibility that it would be a model for other Islamic banks to follow.
Dharb-I-Mu’min: Over the years, many Islamic banks and financial institutions have
been established in the county and there are queries from all quarters whether investing
in such banks and institutions is legal and under Shari’ah, but none of the Mufti has
given any Fatwa on this issue whether the retired people can invest their life-long
earning in these banks or not. What is reason that no Fatwa has been given in this
regard?
Mufti Taqi ‘Usmani:
Giving Fatwa on this issue and terming the investment in
such banks as Islamic and according to Shari’ah is highly sensitive and carries big
responsibility. It is a big decision for any Mufti to give Fatwa on this issue. Because after
the Fatwa, people would invest in these banks and the ultimate responsibility would be
on the Mufti Sahib if the investment is not according to Shari’ah. Therefore, as long as
Muftis are not acquainted completely with the Islamic system of banking they would
never come out to give Fatwa on this issue. Under these circumstances, it is the
responsibility of banks and financial institute that they should approach the Muftis,
describe the banking system to them and tell them how banks are working. When they
are be satisfied with all points then only they will be in a position to give any Fatwa on
this issue.
Dharb-I-Mu’min: Pakistani people are under heavy burden of foreign debt that is based
on heavy interest system. Pakistan is not in a position to retire these debts. In your
opinion how can Pakistan get rid of the IMF and other interest-based financial
institutions?
Mufti Taqi ‘Usmani:
This is the biggest problem of our economy and I have many a
time discussed this issue at length. This is a big fraud to say that loans obtained from the
World Bank or IMF is helpful in the development of any third world country. The reality
is that these loans have never been helpful in the uplift of any third world country.
Rather such loans have caused big losses. Regret to mention that our country depended
on these institutions and pledged the whole nation. Under this situation, in order to get
rid of these interest-based financial institutions of the world, there is a need that the
nation should opt for simplicity and cut the coat according to cloth. We should minimize
our economy according to our resources, control unnecessary expenditures. As long as we
don’t do this we cannot get rid of foreign debts. Almighty Allah has blessed Pakistan with
unlimited natural resources. We can be well-off provided we utilize these resources in a
proper manner. This way we can come out of economic crisis. We should not give up by
thinking “Nothing has happened in past 55 years, what would happen now.” We can still
do a lot. Our motto should be ‘work hard and leave the result to Almighty Allah.”
Dharb-I-Mu’min: A few back when economic development was in its initial stage, a 15day course was organized in which two Muftis from each Madrasah from all over the
country participated. Don’t you think if this course is conducted again to apprise the
Muftis of the latest development in this regard, it would be better and beneficial and also
in the larger national interest?
Mufti Taqi ‘Usani:
Not one, we organized two courses for ‘Ulama and Muftis.
With the blessing of Almighty Allah these courses proved beneficial and on the basis of
these courses a book ‘Islam and modern business and economy’ was written. This is, of
course, our shortcoming that we could not continue with this programme due to our
extra-ordinary preoccupation. However, there are plans that such courses, separately for
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Ulama and Muftis and economists, would be organized. At the time we organized a
conference on Islamic Banking. We planned to initiate the course also but later it was
decided that the series of courses would be initiated after the conference. There is a need
that top bankers understand what has been done for the Islamic banking. As I am not a
part of federal government, I cannot say whether this would be included in the syllabi or
not. But our religious institutes have many a time given this suggestion to the
government. We are optimistic that it would be implemented soon. Insha Allah.
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