The answer is very simple. No with another No. Only rhetoric and rhetoric with no legislation, clarity and awareness among people are the things right now where we have seen them a decade back.
An often overlooked area within Islamic finance is the establishment of comprehensive national interest free banking systems that has been tried in Iran and Sudan with lesser extent in Pakistan.
Interest free banking is a concept denoting a number of banking instruments or operations, which avoid interest. Islamic finance and banking is the more general term which covers not only the avoidance of interest-based transactions but also the participation in achieving the goals and objectives of an Islamic economy. It is for this reason why estimates of the size of the Islamic finance market tend not to include the entire banking systems of Iran and Sudan as well as of Pakistan’s.
Iran is supposed to be the World’s only Completely Riba Free Banking System. However it is also showing some signs now to create a cushion for conventional banking. There is now no limitation for the activities of foreign banks in Iranian free economic zones. They may also open branches and representative offices in mainland or hold 40% shares of an independent unit. It is also believed that the Iranian Interest-Free banking law has simply created the context for legitimizing usury or riba. In reality all banks are charging their borrowers a fixed pre-set amount at a rate of interest that is approved by the Central Bank at least once a year. No goods or services are exchanged as part of these contracts and banks rarely assume any Commercial Risk. High value collateral items such as real estate, commercial paper, bank guarantees and machinery eliminate any risk of loss. In case of defaults or bankruptcies, the principal amount, the expected interest and the late fees are collected through possession and or sale of secured collaterals. As of March 2014, Iran’s banking assets made up over a third of the estimated total of Islamic banking assets globally. They totaled 17,344 trillion rials, or US$523 billion at the free market exchange rate, using central bank data, according to Reuters. Now 1$=42000 IR and no recent data is available on website.
Another country with interest Free Banking System was Sudan that has now moved from Complete Riba Free to Dual System. After concluding the Comprehensive Peace Agreement (CPA), the Central Bank of Sudan Act 2002 was amended in 2006, wherein the nature of the banking system, the Bank and its branches, were specified in Section (5) from the Act as follows:
- The Sudanese banking system shall consist of dual banking system; one of which is Islamic, in Northern Sudan (Dominated by Muslim population), and the other Conventional, in Southern Sudan. (Dominated by non Muslim population)
After the secession of Southern Sudan, the Bank of Southern Sudan (BOSS) became the central bank of the State of Southern Sudan on the 9th of July 2011. All branches of Central Bank of Sudan in the previously southern states became affiliated to it. Topics related to Item no (14) of the Protocol of wealth sharing, concerning the monetary policy, banking, currency, and lending has been frozen. In addition to this, policies of the traditional banking system in southern Sudan, and all circulars of the Central Bank of Sudan related to the dual system have been suspended.
So with these developments example of Sudan as having complete interest free banking system has ended.
In Pakistan a decades old work is in Progress. Banks and educational institutions are doing nothing right now but using their social networks and buildings by distributing awards and holding seminars to attract money.
Currently two basic steps are highly essential in this respect i.e. definition of Riba from judiciary side in clear terms and comprehensive legislation on Islamic Banking and Finance from the government side.
Let us see whether we all i.e. government, regulators Islamic Banks and educational institutions are sincere to do that as the situation is highly confusing and complex at the moment.