Islamic Banking Law in Pakistan

As we know that Pakistan came into existence as the first Islamic republic created in the name of Islam on August 14 1947. The government of Pakistan is bound to follow the instructions of Allah Almighty according to Objective Resolution passed in 1949. Islam is declared the official religion of Pakistan according to the first constitution of Pakistan in 1956 and all rules/ regulations should be according to the instructions of the Holy Quran and Sunnah. The Council of Islamic Ideology was established under the Constitution of 1962 to eliminate the interest from the economy especially from banking sector. The Constitution of Pakistan (1973) requires the elimination of interest (Riba) from the economy as soon as possible. The council consulted a large number of bankers and economists to recommend some alternatives to replace interest-based financial structure in the economy during 1980s. In 1991 Full Bench of Supreme Court of Pakistan ordered the elimination of Riba from the economy until June 30 1992.State Bank of Pakistan(SBP) plays an active role to establish a sound Islamic banking system in Pakistan according to principles of Sharia’h under Quran and Sunnah.