Mateen Altaf

Musharakah meaning partnership, is an Islamic mode of finance in which capital is provided by two or more parties for project development. Banks can provide financing to a project with equity rather than a fixed-interest loan, which most pious Muslim consider haram (forbidden). The profits of the project are shared among the investing parties on the basis of their participation or on a pre-agreed ratio and the losses are shared on the basis of equity participation. The difference between Musharakah and mudarbah is that in Musharakah, all involved parties provide capital to share in the profit or loss of the project. In mudarbah, one party provides the capital and the other acts as an agent to invest it. The agent in a mudarbah does not share in the losses. Equity finance is considered the backbone of Islamic banking. Yet, in the last two decades, debt finance, i.e., short-term Murabaha, has been the most popular mode of financing for Islamic banks. With the growing demand for lon...

Mudarbah is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. The investment comes from the first partner who is called “rabb-ul-mal”, while the management and work is an exclusive responsibility of the other, who is called “mudarib”. The difference between Musharaka and mudarbah can be summarized in the following points: The investment in Musharaka comes from all the partners, while in mudarbah, investment is the sole responsibility of rabb-ul-mal. In Musharaka, all the partners can participate in the management of the business and can work for it, while in mudarbah, the rabb-ul-mal has no right to participate in the management which is carried out by the mudarib only. In Musharaka all the partners share the loss to the extent of the ratio of their investment while in mudarbah the loss, if any, is suffered by the rabb-ul-mal only, because the mudarib does not invest anything. His loss is restricted to the fact ...

Riba can be roughly translated as "Usury", or unjust, exploitative gains made in trade or business. Riba is mentioned and condemned in several different verses in the Qur'an (3:130,4:161, 30:39 and perhaps most commonly in 2:275-280). It is also mentioned in many Hadith. Though it is believed that only the religion Islam has prohibited or discouraged it, but it is also prohibited or hardly discouraged through the Old Testament [1] (i.e., set of holy books granted to follow in Judaism and Christianity) which is cited here, “And in case your brother grows poor so he is financially weak alongside you, you must also sustain him. As an alien resident and a settler, he must keep alive with you. Do not take interest and usury from him, but you must be in fear of your God; and your brother must keep alive with you. You must not give your money on interest, and you must not give your food out on usury.”(Leviticus 25:35-37) While Muslims agree that Riba is prohibited, there is ...

It was a momentous event, as big as the creation of the country itself. On 14 Ramadan 1420, the Shariah Appellate Bench of the Supreme Court of Pakistan gave its landmark decision banning interest in all its forms and by whatever name it may be called. Thus fifty-five years after its creation in the name of Islam (27 Ramadan 1365), Pakistan became the first Muslim country to officially declare modern (and rampant) bank interest as Ar-riba, declared haram by Qur'an. The court also specified a step by step approach to rid the country of the evil of interest. As a consequence of this judgment, certain laws will cease to take effect from 31 March 2000, some other laws from 31 July 2000, and all other laws permitting or condoning interest from 30 June 2001. The Federal Shariah Court of Pakistan had declared the laws allowing interest repugnant to Islam in 1991. The Federal Government of Pakistan and certain banks and financial institutions filed 67 appeals against this judgment in t...

As most of you would know, Pakistan was created in the name of Islam and as an Islamic state in 1947. Therefore, since its independence, religious political leaders and scholars were pressing the demand Islamic Banking in Pakistan and to eliminate the Interest (Riba) completely from the Banking industry & financial institutions of Pakistan. Even the Constitution of Pakistan states that it is the state`s objective to remove Riba based transactions from within the economic system of Pakistan. But unfortunately, this goal hasn’t been achieved, at least so far. The demand of Interest-Free economy from the religious scholars were strong during the period of 1947 – 1960, but it wasn’t successful because no solid steps were taken to make it actually happen and find an alternate solution that can completely remove the Riba based banking system of Pakistan. History of Islamic Banking in Pakistan During the period of 1960 – 1977, the Council of Islamic Ideology (CII) created a stro...

Banking sector has immense important for the growth and economic development of a country. Pakistan has a growing economy and banking sector is playing a vital role in it. Being a Muslim nation our first priority should be Islamic Banking. Efforts for economy wide elimination of Riba started during 1970s and most of the significant and practical steps were taken in 1980. In 1980 initial steps were taken by the State Bank of Pakistan by changing the rules and regulation of the Banking sector. After that in 2001 first certificate had been issued to Meezan bank of Pakistan as a full fledge Islamic Bank. And present there are six full fledge Islamic Bank in Pakistan. (Meezan Bank, Albarka Islamic Bank, Dai Islamic Bank, Dawood Islamic Bank, burj Bank, Bank Islamic Pakistan). More efforts are needed to increase the share of Islamic bank in Pakistan.  Question is how much people are aware about the Islamic banking in our country?  The demand for Islamic banking in Pakistan i...