Can You Explain The Process Of Interest Free Banking Of Pakistan.


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Sajid Majeed answered
Introduction of Islamic Banking:
The process of Islamisation of our banking and financial system was introduced in July, 1979. The Govt. of Pakistan decided that only Islamic economic system can ensure better standard of life to the public.
Amendments in Banking Law:
To facilitate the introduction of interest free banking necessary changes were made in the Banking laws in June, 1980. Different companies were allowed to start the business on the basis of interest free system.

Profit and Loss Sharing Deposits:
All the commercial banks and Bank of Uman started accepting deposits on profit and loss Sharing.
Modaraba Ordinance 1980:
A Modarba means the business in which some persons participate with their money and the managers with their skill and knowledge. The profits are distributed among both the parties. But the condition for the business is that it should be according the principles of Shariah. In order to encourage the business on the basis of profit participation a law was introduced which is called Modarba Ordinance 1980.

It is an organization in which all partners contribute the capital. Profit is distributed among the partners according to their agreement. Banks have been permitted for investment on the basis of sharing in the profit and loss.

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