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Riba,
Money and Currency
It was
expected that the Federal Government would be able to implement the decision of
Federal Shariat Court given in 1992, declaring all forms of
interest-based banking un-Islamic. But the Government has failed to comply with directive and the Supreme Court started on 6th June hearing of UBL's review petition seeking reversal of the Riba judgment. Islamic extremists are protesting over the Government's decision to file appeal rather than implementing the decision, on which one year's postponement was allowed last year.
Quiad-I-Azam Mohammad Ali Jinnah inaugurated the State Bank of
Pakistan on July 1, 1948. In his inaugural address the father of the
nation emphasized upon the need for evolving banking practices compatible with
the Islamic ideals of social and economic life. "It has failed to do justice between man and man and to eradicate friction from the International Field." But State Bank had its teething problems. They continued to nollow the practices of Reserve Bank of India and the advice of the Father of the Nation was forgotten. Couple of
decades later politicians started talking about Islamisation of every thing and
the phrase Islamic Banking was coined. And various commissions or committees
were formed to evolve the mechanics of Islamic Banking and to clarify its
concepts. Their tasks was indeed more than challenging as the In the
days of Late General Zia ul Haque, we got various schemes They also introduced Interest Free House Building Loans and made acquisition of loans for house building more difficult as well as expensive. Now one does not pay interest but what one pays as something like rent comes to much greater amount than the interest that used to be charged in early days of House Building Finance Corporation or by the banks in private sector prior to their nationalization in the seventies. The concepts of Western Interest Free Banking are not much different than what have been introduced here conservatively. Most of them have been adopted giving Arabic sounding names to standard terms. But as far as commercial banks are concerned the allocation of profits to the account holders is not materially different than the conventional interest allocation. The Need for Adopting Islamic Money Standards! In the
7th century AD at the time of dawn of Islam, money consisted of metallic coins
and gold and silver bars. That was the kind of money whose purchasing power was
not only stable but also tended to appreciate, like the worth of It was and still is the simplest and straightforward method of fulfilling the promise of the Rulers who issue coins and currency to give you the real worth of the money - not less than what you acquired when you took that money in your custody. In this respect our Governments have been guilty of breach of the trust as it is incumbent upon the rulers, according to Islamic precepts to protect the interests of his people. Devaluation of money constitutes as a breach of trust of the people according to the standards of trust, measures, weight and balances as prescribed in Quran-e-Hakim and the Sunnah. It can also be termed as a practice akin to indirect form of 'Riba' strictly prohibited by the Holy Quran These days we have paper and credit money besides coins. The face value of commodity money (coins) may be about equal to the value of the material contained in it, usually silver, and copper. Gold is now rarely used for coins. All other kinds of money including Credit money or Flat money are paper backed by promises by the issuer, and the manner that become redeemable and the value that is assigned to them merely by government edict or the laws. Thus the currency notes and credit forms of money are generally made acceptable through a government decree that all creditors must take the money in settlement of transactions; the money thus becomes a legal tender. In
Pakistan the purchasing power of Rupee has been declining since 1947 when the
Rupee was worth more than a Riyal and you could get a US Dollar for less than
RS. 4/-. The 10 gram gold piece was worth about RS. 70 or so. The value of
Rupee has regressed against them by almost 15 to 18 times. At one time
Right from 1947 our imports have been exceeding our exports. We can blame our
trade deficits for devaluation of the Rupee but there are many other reasons.
Our dependence on IMF loans to meet the obligations of our trade deficits has
been growing and the Our
money system needs be modified to meet the standards of trust, measures,
weight and balances as prescribed in Quran-e-Hakim and the Sunnah. The riginal
money system in early days of Islam consisted of silver and gold coins and bars
that had stable value. For evolving standards for paper and credit money there appears to be the need for Ijtehad for the Holy Quran advises again and again to ponder over its verses and various point mentioned therein. Our currency may have to be linked to gold or silver with ample reserves to maintain stability and to make good the promise to convert the currency to silver or gold on demand. Now after 55 years we find ourselves back in square 1 with grossly mismanaged and beleaguered economy and heavy burden of foreign debts. Many Governments have come and gone but none had the will and conviction to implement the Quaid's advice. On the contrary each ruler had their own share in robbing its own citizens, wittingly or unwittingly, in a manner as described by Maynard Keynes (1883–1946),British economist. "The best way to destroy the capitalist system is to debauch the Currency. By a continuing process of inflation governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." But what has surprised me most is they were saying that it may take another 10 to 15 years to implement Islamic System and now they are saying that Interest employed in banking is not taboo. One must
accept the fact that we cannot repay our International loans by a magic wand
and we may have to continue paying Interest for years And future acquisition of
fresh loans to settle deficit in Balance of trade or some developmental project
would be necessary for which we may have to pay the Interest. We are helpless.
But it does not mean that for our domestic dealings Gross Domestic Product and Foreign Debt
Pakistan's foreign debt will increase from $ 33 billion to $ 40 billion by 2012,
according to a study. The reports says that Foreign Debts as a percentage of
GDP would come down from 58 % in 2001 to 29 % in 2012. But recently as a result
of Pakistan' cooperation with USA over the war against terrorism some of the However, the report neither gives the actual volume of GDP for 2001 nor the rate of exchange in arriving that. At the current rate of exchange the figure that would work out from the above data would be in considerable variance with those reported in the reports of Finance Division and State Bank as released on their web site on the eve of presentation of the budget. However,
the report makes one thing abundantly clear. It may not possible to get out of
the clutches of foreign debts. Not even in 30 years! And that the uneployment
rate is over 10% whereas the earlier surveys had been giving impression that it
is only around 3%. Incidentally US is having unemployment rate of around 4 %.
The study as reported also gives the impression that there are no preparations for abolishing interest from next year as decided by the Supreme Court!. Although the projections for next 10 years are given, the study makes no mention of the situation obtaining after interest free operations start and the impact of Free Trade as being pursued by US and some other members of G8. The trend of exchange rates is also skipped. The rate of interest the nation has to pay on foreign loans would be of special interest as we talk a lot about interest free economy and the study shows that we may not be able to get out of vicious clutches of indebtedness! Students, researchers, journalists etc. want to compare the figures of their country with those available for other countries in different fact books or almanacs. They have to depend on the figures of their own country as compiled by the foreigners in the absence of clear and concise presentation by our agencies. Shah N. Khan Related
Article.
Nature and Different Forms of RIBA
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