Investment and Recoveries Laws: Study of Modern and Islamic Banking of Pakistan

Abstract

Since 1947, the people of Pakistan are in demanding to eliminate the Riba from the financial system/mechanism in Pakistan, the constitution of Pakistan is also incorporated this demand. Elimination of Riba in the main objective of the state policy mentioned in the constitution as mentioned in the in the Principles of Policy of the Constitution of Islamic Republic of Pakistan. Quaid-e-Azam, Muhammad Ali Jinnah, in his speech at the occasion of the inauguration of State Bank of Pakistan, had expressed the desire for evolving an Islamic system of banking. Article 38(f) of the Constitution of the Islamic Republic of Pakistan provides: “The State shall eliminate Riba as early as possible.”
Conventional banking system surely the basic need of the every society, it provides several services and functions which also provide to growth of economy as well as increasing of investment projects. Islamic Banking system surely different from conventional banking system, the methods and products in the both systems are differ to each other’s. In Islamic banking system fixed return on investment is not permitted and also fixed charge rate not permitted on loans to customers.
The main purpose of this research study is to determine and analyze the different products in conventional banking system, its importance in view of Islamic and Sharia Scholars and why all products of conventional banking are illegal as declared “Haram” in Islamic banking system. It is also need to be discussed what type of more changes require to be done in the current structure/mechanism suitable for Muslims. The study review and compare performance of conventional and Islamic banking in respect of investment and recoveries operating in Pakistan.
The aims of this study are to evaluate and compare the financial performance in respect of investment and recoveries of Islamic and conventional banks of Pakistan. By this research it will be focused on history and evolution of Modern and Islamic banking, Comparison, principles, challenges, growth, differences and similarities, criticism and recommendations.