THE austerity and reforms adviser Dr Ishrat Husain while addressing the third international conference on Islamic banking and finance at the Institute of Business Management stated that “Islamic banking can eradicate poverty, income inequality, regional disparity and illiteracy facing the country.”
The so-called Islamic banks are more dubious than others as they give the investors something like 5.6 per cent or thereabout interest yearly with slight variations to give an impression that the bank is doing invisible business on their behalf and giving them the dividends on the basis of loss and gain. There is no mechanism available with the investors to check the veracity of bank’s declaration.
I have lived in Saudi Arabia for a couple of years and took a loan from a bank but not without paying a substantial interest. The Saudis and all Arab states charge interest for advancing loans without which they cannot function as banks.
If the goals and objectives mentioned by the adviser on austerity and reforms were achievable through so-called Islamic banks, Pakistan would have progressed by leaps and bounds because the so-called Islamic banks are in existence for at least two decades, but their rate of interest is so dull that not many investors are attracted.
The irony is that Ishrat Husain had been governor of the State Bank for quite some time. Why did not he revolutionise our Islamic banking to achieve even one single stated objectives?
The idea floated by Mr Hussain is utopian in nature but practically unachievable. Islamic banks are a deception. There is no public participation except that it is a silent spectator.
Poverty grips Pakistan. What have the so-called Islamic banks contributed to poverty alleviation so far? Nothing, because any banking system based on interest is exploitive in nature which is forbidden in Islam. Globally there is no free lunch in the banks.
Published in Dawn, November 18th, 2019