Fatwa Institution and Product Development for Islamic Finance in Pakistan

Pakistan, being an Islamic Republic, is constitutionally obliged to eliminate ribā (interest) from its economy. Thus, Islamic Finance (IF) industry was introduced as an alternate to conventional ribā-based system of financial intermediation. However, efforts towards innovative system of IF are not devoid of criticism. Thus, institutions offering IF, are denounced for excessive reliance on stratagems to legalize ribā, misuse of plurality in Islamic legal rules and gross misapplication of the principles of Islamic Law. The pivotal task of determining sharīʻah compatibility of products and services is realized through the institution of fatwa. Hence, the given scenario of industry stipulates critical appraisal of role and protocols of this very institution for product development (PD). This article argues that for consistency of Islamic financial intermediation with sharīʻah, the industry needs to standardize ‘product development procedures' with greater focus on regulating its fatwa institution.