P L d 2000 s c 225 (Riba prohibition stayed)
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In a similar transaction, the OIC Fiqh Academy put as a condition on . the legitimacy of the second sale transaction that it should be concluded with a party other than the party in the first sale transaction. As an example, if a person sold a specific commodity in cash, then he happened to have found the same commodity with another person and brought it from him on credit, both contracts are legitimate and correct.
Question No.4
Is there any difference between a Muslim and a non-Muslim in the matter of prohibition of Riba? Can the prohibition of Riba be extended to the loans obtained from non-Muslim, or for that matter, from Muslim foreign countries whose laws and national policies, together with international monetary laws and policies, are not within the control of the State Bank of Pakistan?
This is a matter which needs discussion with religious Scholars. However, Injunctions of Islam cannot be imposed on non-Muslims. If a Muslim has to borrow from a non-Muslim, he must accept the lender’s terms and in the present.-day-world, all money-lending transactions are interest-based. Even in the times of Holy Prophet (peace be upon him), there we-re instances of interest having been paid to non-Muslim lenders. This supports the view that in case a Muslim (or an organization in an Islamic country) has to borrow, out of necessity, from a non-Muslim person or organization, the terms of the transactions should be governed by the agreement entered into by the parties.
Reply of Islamic Development Bank
Regarding interest-based borrowing from other foreign countries, we mentioned earlier the cases in respect of which the prohibition is waived under the general juristic rule of “Necessity”.
The Government of Pakistan and some institutions under its control acquire loans by issuing bonds and certificates etc. and pay a fixed period-wise `profit’ to the holders of such securities. Does this profit fall within the definition of Riba?
Reply of Mr.Sartaj Aziz
A “fixed period-wise profit” does not automatically fall within the definition of `Riba’ if it does not share other characteristics of ‘Riba’, the most important of which is its exploitative nature. Government, as the borrower, cannot be exploited by the lender (public) as Government is more powerful. All the Government borrowings are at a rate fixed by the Government i.e. the borrower. Lender i.e. the public is in no position to dictate or impose its terms on the Government. It would be difficult for the Government to borrow on Musharika or other Islamic modes because most citizens who want to invest their savings in Government Savings Schemes or bonds want a predetermined and fixed return.
The answer to this questions has been given in the decision of the OIC Fiqh Academy No. 60 (5/11) for 14 1 OH.
Question No.6
It is evident that the value of the paper currency has a trend of decrease in the inflationary situation. If a debtor who has borrowed a particular amount of paper currency repays the same amount to his credit after a substantial time, the creditor can suffer the effect of inflation if he demands his debtor to pay more in order to compensate him for loss of value he has suffered, can this demand be treated as a demand of Riba”.
As explained in answer to Question 1, the introduction of paper currency has led to persistent inflation in the modern world, thereby continuously eroding the real value or purchasing form of money. There are other causes of inflation also. In an inflationary situation, compensation for depreciation of money over time in a period of inflation would be justified. If compensation is not given in such a situation it would tantamount to penalizing creditors or savers, including those with small means. A clear consensus on the subject of indexation is, therefore, necessary to clarify that any compensation paid for the loss of value is not ‘Riba’. The concept of compensatory cost as provided in section 35 of C.P.C. has not been held by the Federal Shariat Court to be contrary to Injunctions of Islam.
Reply of Islamic Development Bank
For an answer to this question, please refer to the answer of the Fifth Question addressed to the Islamic Development Bank.
If all the forms of interest or mark-up are held to be repugnant to the Islamic Injunctions, what modes of financing do you suggest for: (a) financing trade and industry; (b) financing the budget deficit; (c) acquiring the foreign loans; and (d) similar other need and purposes?
Reply of Mr.Sartaj Aziz
(a) As far as trade and industry are concerned, Pakistani banks have already introduced non-interest-based modes of financing which arc being constantly modified and improved to meet the objections of Shariah experts. The latest modifications being introduced at the instance of the Commission for Islamization of Economy will bring about further improvements.
(b) Budget deficit is financed by Government borrowings in the shape of various instruments floated by the State Bank of Pakistan and under the Savings Schemes. As discussed in reply to Question No.5 above borrowings by the Government on interest or fixed pre determined rate of return should not come within the definition of Riba.
(c) As far as foreign loans are concerned, we are in no position to dictate terms to the foreign lender and have to accept loans on their terms or go without them. These foreign loans are always interest based and it is not possible for Pakistan to insist that they give us loans without interest. Pakistan has total outstanding foreign loans of about $17 billion on which the annual debt servicing liability is about $1.6 billion. This is expected to increase to over $2.0 billion in the next 3 years. Pakistan has to borrow at least $2 billion a year in the next few years to service these loans since it is not in a position to become a capital exporting country.
(d) Pakistan has already made good progress in introducing various Islamic modes of financing for different financing transactions. Further improvements will be introduced on the basis of the Report of the Commission for Islamization of the Economy referred to above. However, a clearer and more flexible definition of `Riba’, on the lines suggested in answers to. Questions Nos. 1, 2, 4, and 5 is necessary to maintain a viable financial system which can co-exist with and do business with the rest of the world.
Reply of Islamic Development Bank
Distinction should be made between interest-based transactions on the one hand, for which decision of the OIC Fiqh Academy No.3 for the year 1410H should be consulted, and those based on mark-up added to the actual cost of the commodity sold, on the other. This second category of transaction is one of the Shari’ah-complaint modes of financing; it is embodies in a legitimate Murabaha contract, in addition to Istisna’, Salam, leasing, Musharaka and Mudharaba contracts, as we explained in our previous answers.
Essentially, all Islamic modes of financing are, by definition, interest-free. Thus the door is open for utilizing legitimate modes of financing, whether to finance trade, industry, budget deficit or to obtain foreign financing. These modes are based on one of three principles partnerships, leasing contracts and instalment sale contracts. In the following paragraphs, we intend to recommend particular modes for financing particular transactions, although the door is wide open to select, without any restrictions, any of these modes. For more details, please refer to our response to the second question of the questions addressed to the Islamic Development Bank.
A. MODES FOR FINANCING COMMERCE AND INDUSTRY
1. Murabaha
Under this mode, the financier buys, at a specific cash price, a certain commodity, which is then purchased by the bank’s client at a higher price (i.e. at a profit mark-up), but on credit.
2. Salam
A sale contract between two parties, in which the payment in respect of a fully described commodity is advanced against a specific future delivery date of such commodity.
3. Instalment Sale
A sale contract between two parties, the subject-matter of which is a fully described commodity, in which the commodity is delivered immediately at the time of contracting and the price is deferred until a specific future date.
4. Istisna’
This is a contract of manufacture between two parties, where one requests the other to deliver him a manufactured commodity according to agreed-on description/specifications, delivery date, price and date of payment. In this contract, the price may be deferred.
B. MODES FOR FINANCING BUDGET DEFICIT
1. Mudharaba
A contract in which the capital extended is given a pre-agreed and specific share in the profits; such share is expressed in proportional terms, such as one-third, half or one-quarter. This modes could also be realized through the issue of Mudharaba (investment) certificates.
2. Musharaka
This is the same as a Mudharaba contract, with the difference that in Musharaka both parties participate in management and the provision of capital.
3. Leasing
In this mode of financing the financier purchases equipment or fixed assets that generate services in order to lease them to his client.
4. Murabaha, Salam, Instalment Sale and Istisna’
As it is the case in private companies, Government-owned enterprises can be financed by way of Mudharaba or Musharaka certificates.
In addition to the above, certificates could be issued to purchase equipment or service-generating assets in order to lease them to clients.
Certificates could also be issued to finance instalment sale, either on the basis of Murabaha, Salam or Istisna’.
As joint stock companies obtain financing, the Government could do the same, utilizing the same modes. Government could also finance its purchases on the basis of instalment sale.
To provide an alternative to foreign loans, arrangements could be made to issue Musharaka and Ijara certificates to finance projects, especially development projects.
D. MODES OF FINANCING FOR OTHER PURPOSES
Any of the above modes of financing could be utilized to suit the purpose.
If you are of the view that all the forms of interest are prohibited by Shariah, then what procedure will you suggest to eliminate it from the economy? If you prefer a gradual process, what strategy do you suggest for the purpose which may fulfil the requirements of the Holy Qur’an and Sunnah?
Reply of Mr.Sartaj-Aziz
It is my considered opinion that all forms of interest is not ‘Riba’ and only interest with an element of exploitation of the borrower by the lender is `Riba’. However, even if the Court were to accept a broader definition of `Riba’, its elimination would have to be gradual process. The financial system of country in the modern world is one a large and complex scale and would not be able to withstand drastic changes that violate the basic laws of economics. Also the financial system cannot be evolved in isolation from the world and also in deviation from prevailing political, economic and moral values and norms in a society. For example, a bank will find it difficult to expand its lending on the basis of Musharaka, in the absence of proper Islamic business ethics and correct accounting procedures. The switch over from conventional to Islamic Banking would have to be pursued gradually keeping in view the positive response of the society to Islamic modes of financing and the costs of transactions and of monitoring. Simultaneously greater flexibility in the definition of Riba on the lines indicated above would make the task more manageable.
For the various types of interest and the Sharia’h rules regarding them, please refer to the decision of the OIC Fiqh Academy No.3 for the year 1406H.
Graduation in implementing Sharia’h Injunctions is well recognized in Sharia’h for the general juristic rule on the matter states that “What cannot be entirely attained should not be entirely left”. Such graduation, however, requires the existence of a well-conceived plan and successive or parallel steps, without disturbing the country’s economic system. Also, it requires exerting special efforts to protect the integrity of this economic system, its institutions and structure in accordance with the conditions of each country.
Any proposed strategic plan for gradual and safe transformation should consist of the following phases:
(1) The first phase would involve examination and modification of those laws related to the future of building an interest-free economy. It also involves establishing the institutions necessary for developing Islamic banking in an integrated manner, assimilating its modes of financing and building an Islamic capital market. During this phase, dealings would be based on the old and the new interest-free system. Shari’ah-based transactions should be given incentives. Orientation seminars should be held, at all levels, to familiarize people with the Islamic modes of financing.
(2) The second phase involves a gradual and balanced cessation of interest-based transactions at the national levels (i.e within the State’s territory). Islamic banks and financial institutions would start to find alternatives for investing their surplus liquidity, and for companies and other organizations in need of financing to find alternatives in the market for exchanging their debts with interest- free modes. This would be undertaken while honouring past obligations embodied in repayment of the principal amounts and the interest charged thereon, for Muslims must honour their contractual obligations, ‘ as pointed out in our answers to sixth question addressed to the Islamic Development Bank.
(3) The third phase involves encouragement of the utilization of Islamic modes of financing in all foreign transactions, cessation of new interest-based financing (unless in cases of absolute necessity, as said earlier), honouring past obligations and commencing application of an interest-free financing system to replace the old interest-based one.
More details on this issue could be found in IDB’s response to the fourth question addressed to it.
Question No.9
If all the transactions based on interest are held to be violative of the: Islamic Injunctions, what will be the treatment of the past transactions and agreements? Especially what procedure should the Government adopt with regard to the previous foreign loans?
All the past transactions were based on agreements voluntarily entered into between the banks and their customers which provided for payment of interest. The customer had the choice of taking the money or not and, having chosen to do so and agreed to pay interest, cannot now go back on his agreement and refuse to pay interest having already availed the facility and taken full advantage of the resources provided by the bank. It is also an Injunction of Islam that people who made commitments and entered into agreements must honour them.
Accordingly, if people who try to avoid their obligation to pay interest are themselves committing breach of Islamic Injunctions.
Accordingly, with due respect it is suggested that all the past transactions must be honoured as enjoined by the Holy Qur’an. Banks have been working on the basis of earned income and not recovered income. Thus, all the interest earned by the bank on advances, whether recovered or not, is accounted for in the books of the bank and on that basis returns have been paid to depositors whose money was involved in advances. Thus banks having already paid to their depositors interest on their deposits need to recover interest on advances and if they are prevented from doing so, no bank in Pakistan will be able to survive and the entire economy of the country will risk a total collapse.
As regards foreign loans, this involves not only the sanctity of the agreements made but also the credibility of the country. If Pakistan defaults in payment of interest to its foreign lenders, no further assistance or investment will be forthcoming. Almost every development programme undertaken by Pakistan in public or private depends on foreign loans and assistance which will not be forthcoming if we do not honour our past commitments.
Negotiating with creditors may be considered regarding previous interest-based debts; it would be fine if they accept exchanging such debts with new project Musharaka or Ijara certificates. If such swaps are not acceptable to those creditors, then the principals and interest charged thereon should be paid as this is dictated by the interests of the debtor countries; this would enable them to avoid economic shocks or losing their credibility. The necessity of honouring all previous outstanding financial obligations has been made earlier in our response to the fourth question addressed to the Islamic Development Bank.
Question No. 10
Whether a creditor can fix time and rate of profit while the debtor saying Insha Allah, he will be liable to earn and pay the same in time; failing which the guarantor may give profit asked for plus also a bonus or compensation for delayed payment, if any, and also according to other arrangements regarding the loan. What will be the position if the system of insurance for the said profit is introduced?
Reply of this question was given by Mr.Sartaj Aziz in two parts describing the portion Whether a creditor can fix time and rate of profit while the debtor saying Insha Allah, he will be liable to earn and pay the same in time; failing which the guarantor may give profit asked for plus also a bonus or compensation for delayed payment, if any, and also according to other arrangements regarding the loan to be Question No.10 and portion What will be the position if the system of insurance for the said profit is introduced to be Question No. 10-A. His Reply to Question No. 10 reads as under:--
“In Musharika transactions the sleeping-investing partner can fix a share from the income of the joint-venture and a period at the end whereof accounts would be made and mutual rights and liabilities settled. Third party guarantees, depending on circumstances, are permissible provided elements of ghemar and Ghararare not present in such agreements.”
Reply to Question No. 10-A reads as under:--
The question pertains to the possibility of insuring the losses. If the banks were to work as Baitul-Ma’1 in partnership with the borrowers after examination of the business that the borrower had decided to set-up, then it is quite likely that in ordinary times 70% of the businesses would prosper, 20% might suffer losses and 10% might break-even. The banks would receive their share from each. But to secure themselves against losses the idea of insurance of business losses could be initiated. However, the procedures could be dif; cult. There has been some thinking about insuring the banks against bad loans but no system has yet been developed. However, insurance against losses would appear lawful according to Shariat.
Although this question is not quite clear, two issues might be deduced from it, if our interpretation of it is correct:
(1) If the debtor of a legally contracted debt resulting from Murabaha, for example, delayed repayment of his debt and requested its rescheduling, is it legal in this case to recalculate the amount of profit based on a longer repayment period?
(2) In case there is a guarantor for the debt contracted, when the debtor fails to repay on maturity day, leading the creditor to claim his dues from the guarantor, who requests rescheduling the debt amount, is it possible to extend the repayment period in return for increasing the debt amount?
Answer to these two questions was stated in the decision of the OIC Fiqh Academy No. 10 (2/10), which was mentioned earlier.
Regarding the practice of the Islamic Development Bank, in case of Murabaha and instalment sale operations, no additional amount is charged for delay in repayment by the debt or according to the repayment schedule agreed upon. The Bank is currently studying the means through which it could face the losses incurred as a result of such delays in repayment. Regarding leasing operations, the lessee is obliged to pay rent in respect of the entire period during which he benefited from the lease property.
At this stage, it is pertinent to mention that after completion of the ‘reading of the judgment of the Federal Shariat Court, Maulvi Anwarul Haq, learned Deputy Attorney-General, requested that arguments on behalf of the Federation may be allowed to be addressed after hearing the contentions and views of the Economists, Jurisconsults and Religious Scholars as well as the learned counsel for the respondents so that all such pleas and contentions could altogether be replied. This request was not opposed and as such we proceeded to hear the scholars, jurisconsults and economists who chose to attend the hearing. Yüklə 2,28 Mb. Dostları ilə paylaş:
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