Experts believe that the move will have profound implications for Pakistan’s economy.
Pakistan becomes first Interest-free Islamic Nation. In a historic decision that marks a pivotal shift in its financial landscape, Pakistan‘s Parliament has unanimously passed the 26th Constitutional Amendment, mandating the complete elimination of Riba (interest) by January 1, 2028. This groundbreaking amendment underscores Pakistan’s commitment to establishing an interest-free economy in alignment with Islamic principles.
The 26th Amendment modifies Article 38(f) of the Constitution, which now explicitly states, “Eliminate Riba completely before the first day of January 2028.” This legislative milestone follows the Federal Shariat Court’s judgment on April 28, 2022, led by Justice Dr. Syed Mohammed Anwer, which set a five-year timeline for the removal of Riba from the country’s financial system.
Key Provisions of the Amendment
- Prohibition of Interest: The amendment explicitly bans all forms of interest in financial transactions, ensuring that banking and financial services operate on profit-and-loss sharing principles in accordance with Islamic law.
- Establishment of Interest-Free Banking: To facilitate this transition, the State Bank of Pakistan will oversee the establishment of an interest-free banking system, promoting Sharia-compliant financial products that encourage investment and savings without the burden of interest.
- Support for Small Businesses: The amendment includes provisions for low-interest or interest-free loans for small and medium enterprises (SMEs) to foster entrepreneurship and economic growth, particularly in underserved communities.
- Public Awareness Campaigns: The government plans to launch campaigns to educate citizens about the new financial system, ensuring a smooth transition and encouraging public participation in interest-free banking practices.
Impact on the Economy
Experts believe that the move will have profound implications for Pakistan’s economy. By eliminating interest, the government aims to reduce financial burdens on individuals and businesses, stimulate investment, and promote social welfare. This shift is expected to enhance financial inclusion, particularly for those who have been marginalized by conventional banking practices.
