Eid-ul Azha is an Islamic feast rooted in the ancient monotheistic Abrahamic tradition. Apart from its spiritual value, it is seen as an economic catalyst and a driver of social bonding.

A close examination suggests that the economic impetus unleashed by Eid-ul-Azha is often overstated. While no precise data on the monetary value of Eid-related economic activities is readily available, a conservative guess is that the value of the Eid-ul-Azha economy is around 0.5 percent of GDP.

According to Economic Survey of Pakistan, the value of the livestock sector was Rs 5 trillion in 2019, around 60 percent of the agriculture sector and 13 percent of the GDP. Pakistan’s GDP in 2019 stood at around Rs 38 trillion (current value). According to one estimate, the value of the Eid economy was Rs 200 billion in 2019. This is a mere 4 percent of the livestock sector and 0.5 percent of the GDP.

It is also said that the Eid-ul-Azha is the driver of the leather industry and by extension a contributor to the export sector. The available data is so sketchy that it is difficult to evaluate the merit of this claim. According to Pakistan Tanners’ Association, around 8.01 million animals were slaughtered in 2019. This figure is vastly different from the estimate of the federal government, which suggests that 90 million animals were slaughtered.

Where does Pakistan stand in terms of its global ranking in the leather industry. Nowhere. Among the top 10 large leather-producing countries in 2019, China topped the chart with 6,000 million square feet of leather production with a global share of 25 percent followed by Brazil and Russia with a combined share of 17 percent of the global production. Turkey is the only Muslim country in the top 10 leather producers. It is ranked 10th position with just two percent of the global share.

As regards social bonding, the data does not unequivocally support the hypothesis. In relative terms, Pakistan’s level of charitable spending is enviable. Widespread poverty necessitates attention to social bonds around the year.

Does the mass sacrifice cause significant poverty reduction? The data is not unequivocal on this point too. One of the most effective tools of poverty alleviation is an increase in per capita income. This in turn, requires sustained economic growth. Different levels of economic inequalities across countries make it difficult to come up with a threshold economic growth rate neded to alleviate poverty.

According to a conservative estimate where economic inequalities are wide (as they are in Pakistan), it takes a sustained 3.5 percent annual economic growth over a decade or so to reduce poverty by half. With the contribution of the Eid economy dwindling its impact on poverty reduction cannot be very large.

The social bonding idea sometimes fails in interesting ways. In many cases the animals are sacrificed as an ostentatious display of wealth. Relatives and friends may be greatly disappointed if they do not receive the choicest part of the sacrificial animal.

Why the Eid is no longer as transformative as it could be can only be understood in broad context.

Despite the conspicuous display of our belief in Islam, Pakistan’s abysmal ranking on transparency indices show our true colours. Seventy-four years down the road, our failure to develop a credible social contract with a well-defined division of rights and responsibilities reflects on our warped moral values. It has also paved the way for an endless cycle of conspiracies and palace intrigues, resulting in perennial mayhem and instability.

Pakistan has the worst record in the world in terms of child mortality. Islam’s emphasis on seeking knowledge is categorical. However, Pakistan’s performance in educating its citizens is worse than some Sub-Saharan countries. If the quality of education is any measure, Pakistan’s contribution to the creation of knowledge and innovation is negligible.

A close examination suggests that the economic impetus unleashed by Eid-ul-Azha is often overstated. A conservative guess is that the value of the Eid-ul-Azha economy is around 0.5 per cent of GDP.

The Objectives Resolution, which is the preamble of Pakistan’s constitution states that “No law repugnant to Islam shall be enacted and the present laws shall also be Islamised.” However, Islam condemns riba (interest) as war against Allah and His Prophet Muhammad (peace be upon him) but it is permitted in Pakistan. This has disastrous consequences for economic productivity and social cohesion.

In practice, Pakistan is run on the principles of a free-market economy. Cut-throat competition is at the heart of the capitalistic system. The only tool to coordinate the infinite number of decisions of self-interested individuals about saving, investing and lending is the interest rate. Values like sympathy, empathy, cooperation, and trust are an anathema to the capitalist system because they purportedly introduce inefficiencies in the economic system and distort its incentive scheme.

One of the best-known ways out of poverty is to invest in productive enterprises. Here lies the catch for the poor. The fixed costs and indivisibilities of profitable businesses are generally high. The first obstacle in the way of the poor in investing is that they do not have enough cash savings of their own. Their low income levels are often the reason why they do not have enough savings to finance productive investments.

The second problem is that they find themselves effectively shut out of the lending market. High-interest rates make borrowing a losing proposition. Micro-finance schemes cater to the needs of those with low income and inadequate collateral. So what kind of interest rate is feasible for micro-financing institutions?

An analysis of a substantial sample of micro-finance schemes shows that micro-finance institutions cannot be sustainable unless they charge a nominal interest rate between 30 percent and 50 percent.

One might be tempted to think that if high-interest rates are disastrous, lowering the interest rates may be pro-poor and pro-growth. Existing evidence suggests that low interest rates pose problems of a different type. When the interest rates approach zero, economic recovery becomes harder and inequalities worsen.

When the interest rates are very low, people do not have an incentive to save to get a healthy return for financial resilience and retirement benefits. When the interest rates are ultra-low (or even negative), most households have no hope of wealth accumulation. This damaging result might be acceptable if the lower interest rates spurred growth leading to an increase in the real wages.

The bottom line is that an interest-based system, irrespective of whether the interest rates are high or low, is always exploitative with clear losers and winners. One way out is to gradually phase out interest-based economic activities and replace them with Musharaka- and Modharaba- based Islamic financial activities.

It is because of the fundamental strengths such as sharing of risks, capacity to avert economic bubbles and survive financial crises that Islamic finance has been gaining popularity in the West. Notable scholars, such as Najatullah Siddiqui, Umar Chapra, Monzer Kahf, Hussain Hamid Hassan, Prof Khurshid Ahmad, and Mufti Taqi Usmani, to name but a few, have done a great service to the cause of developing the theoretical framework of Islamic finance and disseminating its principles. Currently, Islamic banking assets constitute around 15 percent of the banking industry in Pakistan.

At the moment, five universities in Pakistan are offering training in Islamic finance. Centre of Islamic Finance at COMSATS University Islamabad, Lahore Campus, is a leading player in providing training in Islamic finance to Islamic scholars and banking professionals. A global conference of Islamic banking and finance is a regular feature of CIF, which brings together Shariah scholars and practitioners from around the world. CIF, in collaboration with State Bank of Pakistan, has trained hundreds of Islamic banking professionals and Shariah scholars to serve the industry and the community.

If the Islamic finance-related education at the university level is further expanded, a vast pool of skilled professionals, well versed in Islamic and conventional finance, will become available. Consequently, innovative solutions may ultimately be found, which may salvage the poor and weak around the world from misery and exploitation. When the overarching Islamic system reflects true Islamic values, smaller components will work in tandem with the whole system.

Dr Rafi Amir-ud-Din is an Assistant Professor in the Department of Economics at COMSATS University Islamabad, Lahore Campus

Dr Abdus Sattar Abbasi is an Associate Professor and Head of the Centre of Islamic Finance at COMSATS University Islamabad, Lahore Campus