Page 43 - CMA Journal (Mar-Apr 2025)

Focus Section

This is classical Mudarabah: One party gives capital
and the other offers skills and management. Profit is
shared and loss is only borne by the investor (unless
there is negligence)

Lesson: Trust and integrity made the Prophet
(S.A.W.W) a sought-after business partner.

5) Musharakah (Joint Ventures with Shared Risk):
Musharakah was a common practice when two or
more traders pooled money to invest in a caravan or
a joint trade journey. world an economic system based on true Islamic concept of
equality of manhood and social justice. We will thereby be
Example: Two businessmen would each invest 50
dinars, buy goods together and jointly manage their fulfilling our mission as Muslims and giving to humanity the
message of peace which alone can save and secure the
sale in another city. They would share profit and loss
based on their investment. This is Musharakah, a welfare, happiness and prosperity of mankind.” – (Source:
State Bank of Pakistan website)
partnership based on risk-sharing—deeply rooted in
Islamic trade ethics. Islam allows trade in those The International Islamic Trade Finance Corporation
commodities and goods that are halal (lawful), (ITFC) is also actively involved in assisting Pakistan's
emphasizing moral integrity and transparency in all economic growth by providing financial assistance,
transactions. including $3 billion in commodities finance and has a
commitment to diversify its portfolio in the country.
Banks act as catalysts in a country’s economic growth by
Additionally, Pakistani Islamic banks provide a variety of
facilitating trade. To promote development, they provide
trade finance, manage foreign exchange operations, and Shariah-compliant financial options for global trade, such
as the Islamic Export Refinance Scheme (IERS). (Sources:
ensure the smooth flow of payments. Pakistan’s banking
and finance industry is actively tapping into the potential International Islamic Trade Finance Corporation and
profit by Pakistantoday.
of the trade sector. According to recent statistics,
Pakistan’s Gross Domestic Product (GDP) is estimated at As Pakistan looks to strengthen its position in global
approximately $374 billion. In 2024, total imports stood trade, Islamic trade finance presents a powerful
at $56.33 billion, while exports reached $32.237 billion. opportunity to align economic growth with ethical
For 2023, imports were $50.355 billion and exports principles. With a population increasingly inclined toward
totaled $28.502 billion (Source: Statista). Currently, Shariah-compliant solutions and a strategic geographic
approximately 25% of Pakistan’s trade is facilitated by location linking key trade corridors, the country is
Islamic banks and Islamic banking windows. With the well-positioned to become a hub for Islamic trade. By
rapid transformation underway in the financial sector, investing in awareness, innovation and institutional
Pakistan has the potential to shift entirely toward Islamic capacity, Pakistan can unlock the full potential of Islamic
trade finance—especially with the landmark 26th trade finance—not just as an alternative, but as a
Constitutional Amendment mandating the elimination of competitive advantage in the global marketplace. The
Riba (interest) by January 1, 2028. This initiative, backed opportunity is not just to grow, but to grow with purpose
by the Federal Shari’ah Court’s April 2022 ruling, paves – rooted in our faith, guided by our values and inspired by
the way for a fully Shariah-compliant financial system and our vision for an equitable and prosperous Pakistan.
accelerates the adoption of Islamic banking and finance About the Authors: Author: Abbas Raza Varayla has over 20
across the country. years of expertise in trade, credit and Islamic Finance making him a
senior banking specialist. He holds several industry certifications. He
This remarkable amendment is aligned with our also serves as an Honorary Secretary at Al-Sadiq (a.s) Institute of
Quaid-e-Azam Muhammad Ali Jinnah’s vision for Islamic Banking Finance and Takaful, actively promoting Islamic
Pakistan, as He, in his speech on inauguration of State Finance education
Bank of Pakistan on 1st July 1948 said: Co-Author: Maria Shahab is a Member of the Management
Committee at Al-Sadiq (a.s) Institute of Islamic Banking, Finance &
“I shall watch with keenness the work of your Research Takaful. She oversees student affairs and leads capacity-building
Organization in evolving banking practices compatible with initiatives for students of the Institute as well as those from various
Islamic ideas of social and economic life…. The adoption of colleges and universities. Her professional background includes
Western economic theory and practice will not help us in teaching banking and economics at renowned colleges in Karachi
and serving as a teacher trainer with Dastak Teachers Training,
achieving our goal of creating happy and contented people. powered by The Citizens Foundation.
We must work our destiny in our own way and present to the

ICMA’s Chartered Management Accountant, Mar-Apr 2025 41