August 17, 2003

www.dawn.com/weekly/books/archive/030817/books16.htm
Review: The historic verdict on riba
Reviewed by S.H. Zaidi

JUSTICE Wajihuddin Ahmed has occupied high positions in the judiciary. He was
a member of the Supreme Courts Shariat Appellate bench that gave the historic
verdict on riba on December 23, 1999. The 1992 appeals filed by the
government and some banks against the Federal Shariat Court’s 1991 decision
against riba were dismissed and the government was asked to implement an
interest-free system after June 30, 2001. This book contains Justice
Wajihuddin’s speeches and interviews at various forums and some published
news items, in two sections — English and Urdu.

Justice Wajihuddin wrote a separate note in the judgment, in which he differed

with stage-wise elimination of interest. He thought this would provide a
means to vested interests to escape implementation. The verdict declares any
amount over and above the principal in a loan or barter transaction, whether
for consumption or production, as riba.

What is the hitch in freeing our economic system of riba? In principle, none,
provided there is will, but in practice, obstacles are huge. At an LHC Bar
Association seminar in May 2001, Justice Wajih referred to a remark of
General Musharraf, in which the latter had expressed resentment that the
verdict was passed during his regime. Justice Wajih attributes the delay in
judgment to the advocate and attorney general having withdrawn themselves
from the proceedings during the (Nawaz) government. The case thus remained
pending for eight years.

On January 27, 2000, Justice Wajihuddin asked for his retirement, after
refusing to take oath under the military government’s PCO that demanded the
judges’ allegiance to “Proclamation of Emergency of the 14th day of October,
1999, and the Provisional Constitution Order No. 1 of 1999 as amended”. In
his interview to weekly Ghazi of February 13, 2000 he said that taking such
an oath was contrary to his earlier oaths to protect the constitution, and
amounted to supporting the government in the plane hijacking case. Since
then, he has crusaded against riba from the public platform.

He has stated, in his speeches, that alternative ways — namely, Musharka,

Modarba and leasing — to run the financial system riba-free. These could rid
the country of its economic ills. Interest must be abolished because it is
against God’s will.

He offers other suggestions. To get rid of foreign loans, the government

should bring back the billions of dollars stashed away by corrupt elements in
foreign countries, and induce overseas Pakistanis to invest in Pakistan. All
domestic loans from the National Saving Schemes should be converted into
shares of public sector companies. All these are easier said than done.
In an August 2002 speech, he conceded that nothing had been done in this
connection by the government since the verdict was passed. This is
understandable, because our economic planning is dominated by economic
wizards from international institutions and multinational banks, who believe
firmly in the virtues of an interest-based economy. The country is dependent,
besides, on interest-bearing loans. Also, the judgment entails amendment of
interest-based provisions of several laws: Land Acquisition Act, Negotiable
Instruments Act, Co-op Societies Act, Banking Companies Ordinance, recovery
laws etc. Are our leaders and planners up to the task?

Referring to an IMF report that interest-free Islamic banking was workable, he

points out that interest-free investment banks are working the world over.
Perhaps what the proponents of Islamic banking have in mind is to convert all
banks into investment banks of this type. But while banks would readily make
their depositors share risks, would they share the risks of business with
those who obtain credit from them for business? Can the existence of
interest-free Islamic banking, in parallel, be taken as evidence that the
whole system can be run on an interest-free basis? These questions await
answers.

To Justice Wajihuddin, a devout Muslim, religion should be the foremost source

of guidance in the nation’s public life. But since religious injunctions are
subject to human interpretation, the riba debate would continue so long as
the formidable obstacles (in its way) are not removed and an interest-free
system is not implemented successfully.

Other views exist that hold that Quranic injunctions against riba do not apply
to commercial or industrial secular loans. Justice Qadeeruddin Ahmed states,
quoting Mufti Muhamad Shafi in What is Riba that riba is not synonymous with
sood, and that Quran and Sunnah give no elaborate guidance regarding
riba-al-Jahiliya.

Doing away with interest does not seem easy at present. If the only choice for
those with surplus capital is to invest for profit, can an ordinary person
place complete trust in the integrity of companies and their account
managers, after recent experiences in Pakistan and in major capitalist
economies? What about inflation, which is due not merely to interest but to
increasing demand and limited resources. Banning exploitative interest only,
rather than interest on commercial or industrial loans on which the borrower
intends to make profit, appears rational.

The book is valuable from another standpoint. It contains interesting and

instructive material (earlier published in the press), that gives some
insight into how the military government manipulated the judiciary to
consolidate its hold on power.
Meezan

By Justice (Retd) Wajihuddin Ahmed

Idara Noor un Ala Noor, Karachi. Tel: 021-6996518

360pp. Rs200 (PB)