Participants and facilitators (pix:dailyobserver) |
Islamic Banking, as a variant of interest free banking, a
system bound by Shariah (Islamic Law) requires that financial products, from
mortgages to savings accounts be structured to comply with the prohibition of
payment or taking of interest.
In recent years, there has been a significant growth in
Islamic financial services globally, and global economic think tank have
projected that “this growth will continue at a rapid pace” with an expanding
demand for its products, even conventional banks are been drawn into providing
Islamic financial services.
Islamic banks’ assets grew on average faster than that of
conventional banks in major markets between 2007/9, and this relatively high
rate growth, accompanied with the tendency to avoid excessive leverage and
risk-taking have given some consumers, including non-Muslims, a new
appreciation of the sector.
Currently, there are about 500 Islamic banks worldwide and
together, they manage close to US$1 trillion worth of assets, in fact, economic
experts projected this figure to increase up to US$4 trillion by the year
2020.
It is on this backdrop that the West African Institute for
Financial and Economic Management (WAIFEM) in cooperation with the Central Bank
of The Gambia (CBG), kick started a regional course on “Rudiments of Interest
Free (Islamic) Banking” on Monday at a local hotel, west of the Gambian
capital, Banjul.
The course, ending on October 21, is intended to provide the
participants a broad understanding of the subject, and provide clarity on the
Shariah requirements and the avoidance of RIBA (usury) in modern day banking
business.
“In 1997, the first Islamic institution, the Arab Gambia
Islamic Bank was established through private equity participation, including
the Islamic Development Bank (IDB), and within a decade, the Bank was able to
mobilize 25, 000 depositors with a total of D400 million,” according to the
Governor of CBG, Hon Amadou Colley.
This, he said, followed The Gambia Government’s (GoTG)
realisation of the potential of Islamic banking, given the country’s majority
Muslim population. The GoTG engaged the
IDB to develop the needed infrastructure for Islamic baking, thus, the revision
of the Financial Institutions Act of 1992 (now Banking Act 2009) to facilitate
the creation of a legal framework for the establishment of Islamic Banking in
the country.
To further deepen the financial system and create an
investment outlet for Islamic Banking and other Shariah compliant investors,
the CBG developed an investible Islamic instrument (Sukul Al Salam) in 2007,
which had a yield comparable to treasury bills. “The instrument gained
popularity and attracted investment from Islamic and conventional banks alike,”
Hon Colley said.
Prof Akpan H. Ekpo, director general WAIFEM |
“Islamic Banking is expected to give depositors another
choice of where to invest their wealth. In this dispensation, the customer and
the bank share the risk of any investment on agreed terms and divide any
profits that accrue there from,” Prof Akpan H. Ekpo, director general WAIFEM
explain. “In our conventional banking environment, it is a fact that borrowers
are at times rendered miserable and frustrated leading to failure as a result
of overbearing interest rates.”
The irony is that while lending rates are always in an
upward trajectory, deposit rates are pitiably low, and Prof Ekpo believes that
a case for “non-interest or Islamic banking” would bridge the gap between
deposit and lending rate.
The non-interest (Islamic) banker sees the business of his
client as his own and does anything legally to ensure his client succeeds,
however, Prof Ekpo argued that such conditions are “unthinkable” in the extant
conventional banking.
The participants will be introduced to the fundamentals of
Islam and Islamic thought; concept and overview of Islamic finance; legal and
institutional framework; operations of Islamic banking; developments and
challenges; risk management; Islamic versus conventional banking; among other
topical issues.
Author: Modou S. Joof for The Voice Newspaper
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