Peshawar, Oct 20: Pakistan's Central Bank has authorized a government-owned bank in the conservative North West Frontier Province to begin interest-free banking in accordance with strict Islamic law, the provincial finance minister said today. Sirajul Haq, the province's finance minister, said Pakistan's state bank was allowing the Khyber Bank, owned by the provincial government, to work according to Islamic principles of not giving or taking interest. Conservative Muslims believe interest-bearing accounts violate a Muslim ban on usury.

The first branch to offer Islamic banking will open in about one month, fulfilling a promise by the coalition of religious-based parties that won provincial elections last October to extend the policy to government-controlled lenders. Previously, only private banks adhered to the policy. Over a period of three years, all 27 branches of Khyber Bank will be convert to interest-free banking, Haq told reporters. A committee of experts on Islamic banking has worked out details for the bank, he said, without elaborating.

Bureau Report