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Aishath Muneeza, Ismail Wisham, Rusni Hassan,
International Islamic University Malaysia
An exemplary situation of an effort to adjust the existing
conventional legislations to accommodate the need of Islamic
Banking laws can be evident from Pakistan. Hence, it is
imperative to grasp and analyze the impact of this change on
the Islamic Banking sector of the country. By doing this the
countries with parallel legal systems might get some idea on
how to crack their legislation struggles.
When Islamic Banking was introduced to Pakistan, some of
the laws dealing with conventional banking and finance in
Pakistan was over one hundred years old. For instance, the
Negotiable Instruments Act dated back to the year
1881. There were laws which regulate the conduct of affairs
of banks as a separate legal entity. There were laws which
authority to regulate the monetary and credit system of the
country of which banks from an integral part. Laws
pertaining to limited companies and partnership firms were
also relevant to banks as they are part of banks’ clientele. So
were some other laws which govern the contractual
obligations of banks with their customers. Besides the above
there were laws which provide for recovery procedures.
These legislations were important to Islamic banks too as the
vigor of the banking system depends on quick adjudication
of disputes and prompt recovery in cases of customers’
defaults. The laws dealing with all matters concerning banks
were enacted in a context which recognized ‘interest’ as the
kingpin of the system. Elimination of interest has lot more
technical ramifications than what may meet the eyes on the
surface. Hence the government put lot of effort to restructure
these laws based on conventional system.
In 1962 a Banking Companies Ordinance was promulgated
which sought to consolidate and amend the law relating to
banking companies. The provisions of this ordinance were
intended to the supplement and in addition to the
Companies Act of 1913 and other laws except where it was
expressly provided. According to Banking Companies 1962
‘banking’ means the accepting for the purpose of lending or
investment, of deposits of money from the public repayable
on demand or otherwise and withdrawal by cheque, draft,
order or otherwise. Deposits accepted by a company for
financing of its own business of manufacturing or trading
are therefore excluded from the definition of ‘banking’.
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