Piety and embezzlement

In Pakistan, ‘double Shahs’ profit from religious Muslims’ alienation from modern banking.

Written by Khaled Ahmed | Published: December 11, 2015 12:00 am
pakistan bank interest ban, pakistan, pakistan banks, pakistan bank interest, pakistan bank, bank of pakistan, news The ban on bank interest in Pakistan is in abeyance because the state has gone in appeal against it.

In Pakistan, the law forbids “interest”, but the banks still dish out “profit” on your savings account. Bank interest, or the kind of money earned without doing trade with it, is “usury”, and banned under a Quranic edict. The Jews had it in their book, but tweaked it to become the moneylenders of the world, and Rome “rationalised” it to allow modern banking among Christians. The oldest critic of usury was, of course, Aristotle, who thought democracy had gone rotten because the moneylenders controlled the citizens sitting in the Athenian legislature.

The ban on bank interest in Pakistan is in abeyance because the state has gone in appeal against it. And the appeal is suitably pending. Muslims hate bank interest and call it “riba”. Aristotle, ever the rationalist, pinpointed the moneylender as the rich man who exploited needy citizens through compound interest. But in Pakistan and elsewhere, even the poor lender as an account-holder in a rich bank is a sinner.

The rich man doesn’t have a savings account and actually pays interest if he borrows through a current account. And if a rich man pays interest, how can it be called “riba”? Allah, who loves the poor and is not too fond of the rich in the Quran, couldn’t be protecting the well-heeled. However, after Jews and Christians ducked out of it, Islam remained literalist. The alternative banking called “Islamic banking” does the same sort of thing through what is called “heela” (subterfuge)! You don’t borrow, you become a partner and take “profit”. The banks in the UK love it because Muslims take a hit of a couple of percentage points to remain pious.

Pakistan’s religious court, the Federal Shariat Court, wants to dust off the pending case and finally ban all modern banking, lotteries, insurance, etc. A predictably funny thing happened at the hearing in October. My favourite lawyer, Salman Akram Raja, representing the State Bank of Pakistan, told the honourable court that “the Constitution specifically mentions the elimination of interest,

but does not define interest or riba”. He said, “The economy thrives on instruments, including taxes and loans, and that the country, in its economic interest, should stay in touch with the global financial system.” The court that had banned “riba” in 1992, decided to hear the case again “after vacations”.

Hearing that, religious scholars gathered under the flag of the Ulema Union and announced that the “Islamic scholars from all schools of thought would start a vigorous movement against the usury/ interest system with the support of the general public.” But Turkish scholar Timur Kuran, who has written on the economic history of Islam, blames the usury law for the vacuum of financial institutions in the past and the resultant emergence of the Muslim man as a marauding warrior rather than a businessman. He writes: “The emergence of banks in Europe led long-term British interest rates to drop by two-thirds leading up to the Industrial Revolution. No such drop occurred in the Arab world until the colonial period.”

Trying to explain why Pakistan is making such heavy weather of “riba”, the book An Introduction to Islamic Finance: Theory and Practice (2008) says the term is not an economic theory and there is nothing in the Quran and hadith to make us believe that it is so. The Quran prohibits riba, but is not clear about what constitutes riba. Later, exegesis was needed and Muslim jurists have decided that any money begetting more money was wrong, and no transaction in which the lender didn’t “share risk” with the borrower was permitted. Riba is still to find its correct expression in English. Literalism hounds them when Muslims take a Quranic verse and don’t rationalise it through context.

It is clear that the city-state of Medina had the same sort of problems from moneylenders as the city-state of Athens because Plato railed against interest as did Aristotle, whose dictum “money should not beget money” was taken literally centuries later by Muslim jurists. Democracy in Athens was derailed because power passed from the assembly to the moneylending oligarchs. The borrower, not the lender, had to be protected. On the other hand, today, it is the savings account-holder who should be defended by the State Bank against malpractices of the borrowing bank of both sorts, conventional and Islamic.

Religious Muslims in Pakistan, alienated from modern banking, go for “riba”-less schemes called “modarba”, run by pious clerics who routinely abscond with money running into billions. They come on the scene with Syed names and promise to “double” the amount banked with them. They are called “double Shahs”, “Shah” denoting their sacred birth.

Of the many “double Shahs” of Pakistan, one was truly big. Syed Sibtul Hassan Shah, known as “Pir Double Shah”, was famous for doubling the money deposited with him in 70 days. A majority of his clients were police officers, lawyers, teachers, shopkeepers, villagers, farmers and household wives. He died this year after being arrested for not delivering on the Rs 12bn he had collected. Many Islamic scholars who embezzled money like this have been let off because of their irreproachable piety and their “background” strength from the “non-state actors”. The judges of the honourable court charged with the task of Islamising the country’s financial system are surely reading their Timur Kuran.

The writer is consulting editor, ‘Newsweek Pakistan’

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  1. M
    Murtuza Rangoonwala
    Mar 6, 2016 at 2:17 pm
    Though Quran as clearly distinguished between trade and interest, some people intentionally mix trade with interest saying that "trade is just like interest". The Quran warns such people of the evil consequences of this atude and admonishes them to absain from this evil practice. Islam has strictly prohibited lendings of savings on interest. Though people are free to save as much as they like, in the economic system of Islam, their savings would not grow with interest. The Quran encourages people to spend more and more for the common good of society, and ures them that by so doing, their wealth will not decrease but will increase in the eyes of Allah.
    1. K
      K SHESHU
      Dec 11, 2015 at 7:05 pm
      If the stani government does not regulate the banking system with proper fiscal and physical measures, unofficial 'Shylocks' will rise and start a parellel banking economy!
      1. K
        K A
        Dec 11, 2015 at 6:42 am
        Any restriction on society on the basis of "Moral Grounds" or on the basis of Religion results in fraud by few individuals. The same Religious Authorities who impose restrictions on common people, indulge in secret and fraudulent activities.
        1. R
          Dec 11, 2015 at 8:16 am
          Honestly, why do you Mullahs even try to live in the civilized, modern world. Just live stick to your 7th century beliefs, die and go to your paradise. You seem to take so much difficulty trying to adapt a backward ideology for the modern day.
          1. V
            Dec 11, 2015 at 3:53 pm
            There is one thing absolutely sure that usury is ofcourse bad. But regulated lending on moderate interest rate is very helpful during distress condition. Not just helpful but justified too. Going too far this way or that way is harmful. Buddha's middle path can rescue from give tyranny of such extremes in such cases.
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