Despite admitting the importance of Islamic banking to the development of the financial sector, the Bank of Ghana (BoG) and the Ministry of Finance are yet to go beyond aspirations on the concept, almost two decades after it was first conceived.
The lukewarm attitude to the concept of interest-free banking is traced to the lack of a regulatory framework to guide its introduction in the country.
To help address the lacuna, a consortium of consultants, GM Ambassadors, has agreed to build the capacities of the BoG and the ministry to help quicken the country’s progress towards adopting Islamic banking.
Unlike commercial banking, which thrives on interest rates on loanable funds, Islamic banking thrives on profit-sharing as it forbids charging of interest.
The Director of Business Development at GM Ambassadors, Mr Mohammed Fawzi Aminu Amadu, said the capacity building exercise would help the two institutions to develop the relevant framework needed for Islamic banking to thrive.
Once devised and introduced, Mr Amadu said the framework would attract investments into the sector.
He spoke to the GRAPHIC BUSINESS on the sidelines of an Islamic banking round-table organised by the Dubai Chamber of Ghana.
“There is no trust (from investors of Islamic banking) due to the lack of framework. The licence just gives you the power to do it, but there are no regulations or legal system to tell you how to do it and this is what is preventing investors from venturing into it,” he stated.
“The authorities need to understand and know how to manage Islamic banking but as at now, there is no sufficient internal capacity to do that,” he noted.
Mr Amadu of GM Ambassadors, which is a consultancy group with special interest in Islamic banking, said his outfit was in the process of engaging the BoG and the MoF to help them get proper training opportunities in Islamic finance.
“There should be an in-house understanding of the procedure then together with them we create a process and framework that will govern Islamic banking,” he explained.
“We have been able to get the Islamic development bank to agree to do some training workshops for the responsible entities such as the BoG, MoF, Attorney General, and the Parliamentary Select Committee on Finance, which will commence soon,” he added.
He said these stakeholders would be trained on what Islamic finance was and how to create an enabling environment for it.
He also pointed out that it had engaged some investors who were willing to provide financial support towards the training and creation of the enabling environment for Islamic finance in the country.
“There are investors who are interested in putting their money in Ghana but want it in Islamic finance form so as part of their corporate social responsibility, they want to help us with some money to train the stakeholders,” he stated.
“We have gotten in touch with a lot of such people and we are working out the modalities. Initially, we didn’t have any credibility because we were not speaking on behalf of government but now that both the BoG and the MoF have given us a letter of credence and we are now collaborating to get things done fast,” he added.
A former Governor of the Bank of Ghana, Mr Emmanuel Asiedu-Mante, said none of the banking laws made provision for Islamic banking in the country and, therefore, called for a change in the law to make provisions for it.
This, he said should precede BoG’s consideration for issuing licences to interested institutions to operate Islamic banking.
“If there is going to be Islamic banking, then there is need for a change in the banking law to make provision for that,” he stated.
He also pointed out that there were intelligent people at the BoG who could be trained on Islamic banking to come out with the regulations to back it.
“Naturally, it’s something new on the market as all along we have been doing the traditional banking which charges interest. It’s not as if it is a new thing from the moon; there are countries in the Middle East that practice it.
“In this day and age too, we can access information on the computer so if the BoG decides that this is the way to go, they can either send people to go and study or can collect data and information and draft the necessary regulation,” he explained.
Awareness is key
A Lecturer at the University of Applied Management, Dr Abubakar Mohammed Marzuq Azindoo, also in an interview with the GRAPHIC BUSINESS, said although regulations were necessary to attract investors, awareness was more important to ensure a vibrant Islamic banking regime.
“It is unfortunate that Islamic banking is so virgin that it is little known even in the conventional banking fraternity.
“Collectively, the nation has a responsibility to build a strong public opinion in favour of Islamic banking and finance as a credible alternative banking model to help accelerate the national development agenda,” he stated.
He, therefore, called for an effective collaboration between the Islamic banking industry and the media in order to create awareness.
He said media practitioners had a chapter of recognition in the political history of this country and their contribution to the fight for independence remained a source of pride and recognition.
“They still have a responsibility not only to maintain the recognition but to consolidate it in relevant sectors of governance. There is, therefore, the need for them to initiate efforts and strategies for another struggle for economic sovereignty of Ghana,” he said.
“There is no doubt that Islamic banking and finance offers them an opportunity to conceive and actualise the efforts and strategies for the battle for economic sovereignty,” he added.
The Head of the Dubai Chamber of Commerce Ghana, Mr Cyril Darkwa, in his opening remarks pointed out that Islamic banking was a sector which offered huge growth potential for Africa and Ghana in particular.
Globally, he said, Islamic finance assets were projected to grow by nearly 72 per cent to exceed US$3.7 trillion by 2022, supported by global appeal and consumer demand and, therefore, urged the country to take advantage.