CSS Solved Business Administration Past Papers | Discuss and evaluate the endeavors during past decades in Pakistan for the development of the Islamic Economic System.
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Topic Breakdown:
Capitalism has emerged as the most influential and widely accepted economic system. Although communism competed to an extent, the real alternative is considered to be the Islamic economic system.
Subject: Finance
Chapter: Islamic economic system
Introduction
The capitalist economic system has it’s embedded in almost every economy around the world, with developed economies leading the way. However, an alternative to this system and a much debated one is the Islamic economic system. Interestingly, this system was not formulated or proposed by any economist; it was included in the religious teaching of Islam. While the capitalist system believes in the accumulation of wealth, the Islamic economic system advocates the distribution of wealth. Social justice, welfare and equality are the pillars of the Islamic economic system that are accomplished through unique concepts like Zakat, Ushr and an interest-free economy. Pakistan, being an Islamic country, has desired to adopt an Islamic economic system; however, despite stern efforts, it is still a dream far away.
Basic Principles of the Islamic economic system
- The primary principle of the Islamic economic system is the distribution of wealth and discouraging luxury.
- Poverty alleviation and wealth distribution are ensured through Zakat and Usher.
- Islam strictly prohibits Riba (interest) and the use of money as a source of income.
- Islamic economic system encourages business.
- Islamic economic system believes in the system of charity as a means to purify wealth.
- The concept of inheritance was introduced by the Islamic economic system.
Steps taken by Pakistan for the development of the Islamic economic system
The establishment of an Islamic economic system was a mammoth task that was started in Pakistan during its years. However, due to its magnanimity and intensity, the government decided to implement it in phases. The following are the steps taken by Pakistan for the development of the Islamic economic system:
- A special banking company’s ordinance was approved in 1962 to allow a provision for mark-up, leasing and hire purchase. This was the first step towards the establishment of the Islamic banking system.
- A number of steps were taken in the late 1970s era of Islamization. One of the steps was the establishment of modaraba companies and allowing them to float modaraba certificates with risk-free capital.
- Zakat and Ushr ordinances were imposed as a means to develop the Islamic economic system.
- Institutions like bait-ul-maal were established to collect and distribute taxes.
- Riba was completely banned, and several interest-free counters were established in banks across the country.
- In the 1990’s era federal Shariat court played an active part in the imposition of the Islamic banking system, and in Dec’1999, it passed a famous judgment which led to the promulgation of the “prohibition of Riba ordinance” and “financial transactions ordinance”.
- In 2002, the doors officially opened for Islamic banks to operate, and Meezan Bank was the first to start its operations.
- Moreover, frequent schemes were launched to give interest-free loans for businesses and housing.
- In the judgment announced in April 2022, the federal Shariat court ordered the government to implement an interest-free economy in the next five years.
- Individual entities were encouraged to participate in charity activities like the Edhi service.
Why Pakistan has failed in its endeavour to implement the Islamic economic system
- The government failed to implement an effective system of collecting Zakat and Ushr, ultimately resulting in only a small portion of the actual amount being collected.
- Although it focused on imposing an interest-free system, its main institution, the State Bank, continued to transact in interest-based transactions.
- Overreliance on foreign debt and investment added to the hurdles.
- Accumulation of wealth existed at individual and state levels despite being against the core Islamic economic principles.
- Unassailable corruption and the absence of accountability have hindered the circulation of wealth.
Conclusion
Although Pakistan desired to implement the Islamic economic system in practice, unfortunately, lack of intent and weak economic policies have strayed Pakistan from its goal. Despite taking minnow steps in phases, Pakistan has continued to rely on the capitalist system for the thin breathing space. Pakistan’s failure to collect and estimate the actual amount of tax, Zakat and Ushr, has been a big obstacle in its mission. Moreover, Pakistan’s economy does not have enough capacity to alienate itself from the mainstream economic system. Therefore, despite all its ambitions and promises to become an interest-free economy, Pakistan is still poles apart.
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