Islamabad: Pakistan’s parliament has passed a historic constitutional amendment that mandates the full elimination of “riba” or interest by January 1, 2028, as reported on October 21.
As per details, this significant move comes in response to a 2022 ruling by the Federal Shariat Court (FSC), which instructed the government to eliminate all forms of interest by 2027. The court ruled that interest, in any form, is strictly forbidden under Islamic law. The FSC, which ensures Pakistan’s laws comply with Islamic principles, played a pivotal role in this decision.
Pakistan’s central bank has already set targets to boost Islamic banking, aiming for it to account for 35% of the country’s commercial banking by 2025. Currently, Islamic banking holds a 20% share of the sector. Over the past five years, Islamic banks have seen consistent growth, with assets and deposits increasing by 25% and 22% annually.
Pakistan now has six full-fledged Islamic banks offering a broad range of financial products. This amendment is expected to accelerate the country’s transition towards an interest-free financial system, aligning the banking sector with Islamic principles and fulfilling the goals set by the FSC.
