Muhammad Airf

Muhammad Arif
Muhammad Arif: Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research ArifHabib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan.

Islamic Ideology Council in Pakistan on Islamic Finance

In Pakistan two portfolios have normally been used for political bribery. One is Kashmir Committee and the other is Islamic Ideology Council. So with this mindset neither we have moved near to Kashmir solution nor did we get closer to implement Islam and its systems in our lives.

In the current grave situation when the country requires true interpretations of Islam to counter Islam on gun point, The Council of Islamic Ideology which is an advisory body has time and again failed to respond to the needs of the time. Their mindsets are in line with tribal setup and most of the times they refuse to accept the realities of the modern world. Although they accepts the benefits of science and modern technology but when it comes to women DNA testing then it is not acceptable as primary evidence in rape cases.

Somehow, instead of selecting scholars, jurists and learned persons, mullahs and representatives of conservative Islamic parties always commanded a majority in Council of Islamic Ideology Council.

Instead of serving as a useful body which could do Ijtehad and help in progressive law-making, it has become a burden on the national exchequer.

This is not a coincidence that both Taliban and Ideology Council mostly focus on women and women only. They say that Islam has provided maximum rights to the women. They also say that 2nd, 3rd and 4th marriage can be done if one can do justice. But what about practical situation. Whether in our society where women are just slaves, can they have courage to go against such marriages? What about Wani, Exchange of women on the orders of Jirga’s. What about women working day and night in the fields and at other homes with their husbands doing nothing. What about women tortured most of the time by their male counterparts. What about women deprived from their rights from getting education. What about women for not getting their rightful shares in Wirasat. What about women being kept by the feudals Sardars for their use. Whether Islamic Ideology Council has raised any voice against such atrocities or has proposed anything to avert such incidents.

More importantly what Islamic Ideology Council has done to change the political and economic systems to bring them in line with Islamic justice? Riba is still dominant. Whether scholars sitting in Islamic Ideology Council have done anything to replace it by bringing alternate systems.

These are realities for which Islamic Ideology Council should be made accountable and Government should bring competent people in this sacred institution to make it relevant in bringing positive changes in our society particularly on the front of Islamic economics and Islamic Banking.

Islamic Banking-lot needs to be done


Islamic banking has now become a reality but still it needs to be developed a lot.

Islamic Banking and Finance based on Islamic economics comes from the trading activities of any society with the objective to achieve its welfare goals.

Mostly it has been provided in the advertisements of Islamic Banks in Pakistan that for Falah and getting better place in Yome Akhrat you should place your deposit with Islamic Banks, but this is not enough. General perception about Islamic banking is that it is nothing but Conventional Banking with change of name. This perception is required to be changed by taking practical steps and devising products and techniques to make it a part of overall economy in the light of Quran and Sunnah.

People are not interested that how much growth Islamic Banking have achieved and how much well-furnished buildings they did make but they want to know that how far these institutions are playing their role in betterment of economy that is not up to the mark in most of the Islamic Countries and particularly in Pakistan.

At present the bottom half of the global population owns only 1% of the global wealth. On the other hand, the richest 10% own 86%, and the richest 1% owns a staggering 46% of the global wealth.

The Islamic world comprises a population of more than 1.8 billion people which is 23 % of the world population, including more than 900 million youth under the age of 24 years. It has a combined GDP of $ 7.5 trillion, which is only 12.4 percent of the world GDP. These countries are spread over a land mass which is 1/3rd of the world and possesses vast amount of world’s natural resources. They connect East with the West yet their exports are only 11.61 % of the global exports and imports are only 2.16% of global imports. Average GDP per capita in 53 Islamic countries is $ 7,300 which is less than half of the global average of average GDP per capita. Despite sporadic efforts over the last 50 years Islamic world have failed to realize their true potential. They need to make sustained efforts for rapid social and economic development.

It is a fact the richest country of the world with $ 68,977 per capita is a Muslim state i.e.Qatar and the poorest country in the world with per capita of $ 481 is Mozambique. So with this position we have to address our home first by denting poverty in these areas. Islamic Banking has started developing from 1977 and in Pakistan from 2000 onward. It should have been remained the main tool for bringing welfare to the people in these countries otherwise its growth seems meaningless for them.

Taking example of Pakistan like old rhetoric, Islamic banking industry (IBI) has continued its both assets and deposits registered growth as asset base of the industry reached to Rs. 2.79 trillion while deposits reached to Rs. 2.199 trillion by end March 2019. In terms of market share in overall banking industry, share of both assets and deposits increased during the review quarter to reach 15.0% percent and 15.6 percent respectively.

On financing side it contributed mostly through debt based financing other than Musharkah and Ijarah accounting 76% of total financing.This makes no chance for creation of Islamic Money Market. SBP is not interested to account for Islamic Banks for its monetary policy operations. In this regard like Indonesia or Malaysia no serious efforts seems to be on agenda. Liquidity support mechanism from SBP to Islamic Banks is yet not available except with Bai Muajjal with very little role. Even Government has not yet devised any short term liquid security to replace Ijarah based security for 3 years to create Islamic benchmark rates. No legislation on Islamic Banking in Pakistan is available.

Going forward lot is required to be done. Unfortunately Islamic Banking Department of SBP cannot do this. For that proper Staff is to be placed there.

Viable alternative can be to form an independent forum for bringing clarity on the subject. Banks like Meezan Bank, Burj Bank, Khyber bank and Sind Bank with other banks can play some role in this regard.

No answer from Islamic Banks in regard to following Businesses


The Islamic financial law has long history but Islamic banking and finance industry came into existence with profit and loss sharing investment by Egypt’s Mit Ghamr Saving Banks in 1963. After official existence Islamic banking has grown in the area of finance, banking, insurance, mortgage, and assets management business with annual growth rate in double digit. But actual development in Islamic banking has started after 1970 with new investment techniques, strategies and product development.

In some countries such as Iran and Sudan mostly banks are operating according to Islamic financial law but in some other countries such as Pakistan, Bangladesh, Egypt, Indonesia,Jordan and Malaysia Islamic banking services are provided through Islamic Banks or windows provided by the conventional banks.

The main hypothesis presented in favor of Islamic Banking is that Muslim population wants to spend their lives according to their faith. According to Islamic teaching interest is strongly prohibited in Islam and they want to take banking services such as saving accounts, current accounts, home finance, insurance and loan according to Islamic Sharia law. Since in most of the countries their banking and financial rules are most in favor of conventional banking system hence due to this Islamic banking is facing some difficulties in the way of its progress. In other word these problems are great challenges for Islamic banking however if they work hard Islamic banking will be developed in short period of time.

This raises a question about faith, what we mean by it, since Islam is a natural religion and its all beliefs are based on scientific principles or some understandable arguments. Islamic finance means business and no business can go without profit and loss. This is contrary to conventional finance where profit is already fixed irrespective of the fact whether business is at loss. Apparently this is exploitation. But if Islamic Banks get loss in its investment on trading basis than it is not liable to pay any profit under arrangement of Mudarbah or Musharkah. This also creates exploitative kind of business in environment of inflation or time value of money which is also not permissible in any religion or on moral values. From this angle Islamic finance becomes more risky; hence to cover this risk, element of higher return becomes inevitable. However most of the Islamic Banks normally pay less return than conventional banks due to some obvious reasons. This kind of action raises various questions. They are as follows:-

  1. Whether Islamic banking sector has a potential for product development? Whether Islamic

Banking is in a position to satisfy its customers?

  1. Whether Islamic banking has a potential to perform active role in the Financial Market and its growth in market development?

  1. Whether Islamic banking is able to enhance the investment opportunities in the country and whether it can play prominent role for the country’s economy?

  1. Whether there are any affect of the any country’s environment (political, social and geographical) for growth and development of Islamic banking?

  1. Whether Islamic banking has proper regulatory and institutional framework in the jurisdiction where it is working?

  1. Whether Islamic banking has any problem in any country in respect of supervision and Scholarly committees?

  1. Whether Islamic banking is fully informative to its customers or facing any difficulty in its marketing sector?

  1. Whether Islamic banking is in a position to survive and develop in the age of competition and Globalization?

Unfortunately there are no cogent answers for the above questions particularly in Pakistan. This requires immense research which cannot be done by the degree holders coming out of Madrasahs. For this a joint effort is required from the Bankers having full knowledge of conventional and Islamic Banking, legal experts, Shariah Advisors and Market practitioners. This combination on joint basis can come up with the required answers. Centre of Advisory Services for Islamic Banking and Finance ( is in a position to coordinate in these efforts with its research activities.


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