334 chapter eight
grants or an interest-free loan for a maximum period of 16 years,
including four years grace period, with a service fee of about 1.5%.
The IDB role in financing projects and trade, as well as other ser-
vices, has been of considerable help to Muslim communities. The
policies of the Bank have been compassionate, but not slack, prudent,
but not severe. The interest of both beneficiaries and providers of
finance has been under careful examination by the IDB management.
Or to conclude with the words of the IDB vice-president, “It is
important to note that IDB does not have any policy conditionalities
attached to its financing, be it for project or trade operations. The
Bank is definitely not a “fair weather” friend. We are friends for all
seasons to all member countries. We are always there for them, in
good times and bad times. Our financing activities are based solely
on the good intention to assist the development efforts of the Ummah
in member countries” (Aznan, 2003) There is a strong evidence to
suggest that the assertion made by the Bank carries conviction.
The Islamisation of Economic Systems in Some Muslim Countries
The declaration of the Pakistani government in 1979, under the pres-
idency of General Ziaul Haq, of transferring the whole economic
system to an Islamic economy was the first serious attempt by an
Islamic government to put Islamic economic principles into real appli-
cation. Various steps were taken by the government towards the
Islamisation, which were mainly: the application of an Islamic tax-
ation system, the establishment of the Zakàh institution and the elim-
ination of interest from the financial system and replacing it with a
system of profit and loss sharing (PLS).
The first phase of substituting interest by a profit and loss shar-
ing system came in 1979 when the government changed the basis
of operation of the National Investment Trust (NIT), a Trust that
was established in 1962 under the patronage of government to mobi-
lize savings for investment in the corporate sector, on an interest
free basis with effect from July 1979. The reaction of savers to the
change was positive; the NIT achieved a substantial increase in net
sales, and dividends and capital gains following the conversion (Shahab,
1982). Similar changes of the basis of operation had also been applied
to the Investment Corporation of Pakistan (ICP). The ICP was estab-
lished in 1966 to operate as an investment bank with a view to