ISLAMABAD: The Federal Shariat Court (FSC) on Thursday announced a verdict on Riba (interest), declaring the prevailing interest-based banking system as against the Sharia and directed the government to facilitate all loans under an interest-free system.
In its long-awaited verdict, the court ruled that the federal government and provincial governments must amend relevant laws and issued directives that the country's banking system should be free of interest by December 2027.
The court observed that banks were receiving more than the loan amount when fell under the category of usury. "Islamic banking system is risk-free and against exploitation," Justice Dr Syed Muhammad Anwar remarked.
"Almost two decades have elapsed but the governments have not taken any decisions against the interest system," Justice Anwar said.
The court also declared all the provisions of the Interest Act 1839, which facilitate interest, as unlawful.
The FSC had reserved its verdict in the case on April 12.
The full FSC bench comprising Chief Justice Muhammad Noor Meskanzai, Justice Dr Syed Muhammad Anwar, and Justice Khadim Hussain M Shaikh had heard a number of constitutional petitions filed against the interest-based banking system in the country and reserved the decision of the case after the completion of arguments of the lawyers of the parties.
In the hearing today, Justice Anwar said an interest-free banking system is possible the world over. He emphasised that the elimination of interest from the economic system is a shariah and legal obligation.
"I disagree with the federal government in its reply stating negative effects of interest-free banking," the judge noted.
The first petition for the abolition of the interest-based banking system in the country was filed in the FSC on June 30, 1990.
The then chief justice of the FSC, Dr Tanzeel ur Rehman, had constituted a three-member bench that delivered judgment in the case on November 14, 1991, and sought its implementation by April 30, 1992. The then PML-N government had challenged the decision in the apex court.
Years later on December 23, 1999, the Supreme Court upheld the decision of the FSC and directed authorities to ensure its implementation by June 30, 2000.
Subsequently, a review appeal was filed in 2002 with the top court, and on June 24, 2002, the decision of the Shariah Court was suspended and the case was referred back to the FSC for interpretation of Riba.
The case against the interest rate system had been pending in the Shariat Court for the last 19 years. Around nine chief justices of the FSC have completed their terms since then, but the case remained undecided until its verdict was announced today.