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Ghana’s Long Journey to Islamic Finance



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By Baba Yunus Muhammad

Islamic finance today has become a global growth phenomenon that no region or country can afford to ignore. According to the State of the Global Islamic Economy Report 2020/21, an annual industry report produced by Thomson Reuters, the global market for Islamic financial services, as measured by Shariah compliant assets, is estimated to have reached US$2.88 trillion, and projected to reach US$3.69 trillion by 2024. Islamic commercial banks account for the bulk of the assets with investment banks, Sukuk issuances, funds and insurance making up the balance. With over 500,000 Islamic financial institutions operating around the world, Islamic finance is set to become a major global player in the world of finance. The factors that drive the growth of Islamic finance range from increased petrodollar investments from the Gulf, growth in Muslim population and the ethical character and financial stability of Islamic financial products.

Currently, the Middle East and South East Asia and some few African countries, are the primary locations for Islamic capital. In particular, Malaysia, Iran and the majority of countries from the Gulf Co-operation Council (GCC) such as Kuwait, Bahrain and Qatar are seen as the main centers of Islamic finance, with significant activity also taking place in the UK and more recently in countries such as Turkey, Sudan, Nigeria, Egypt, South Africa, Kenya, Senegal, Jordan and Syria and some Asian countries such as Indonesia, Hong Kong, Singapore, Bangladesh, Pakistan and China.

Islamic finance in Ghana

However, amidst all the talk of bubbling Islamic finance hubs globally, there remains much to be achieved on purely a domestic basis in certain key countries. Ghana is a clear example. With the exception of Nigeria, there is probably, no country in Africa that offers greater potential for the growth of Islamic finance than Ghana!

Ghana is among Africa’s largest untapped Islamic finance markets. Despite the growing potential of Islamic finance and its impressive growth in other parts of the world such as the Middle East, South East Asia and Europe, it is yet to find favor with Ghanaian authorities. Ghana has a significant Muslim population of about 7 million of its 32,623,337 population. Yet, there are no Shariah compliant financial products and services currently available in Ghana. There is also, no fully-fledged Islamic bank or Islamic banking window currently operating in Ghana. A recent survey however, suggests that a considerable number of Ghanaian Muslims and non-Muslims as well, would prefer to invest in non-interest bearing instruments or products or donate the interest from interest-bearing accounts to charity.

Government’s lukewarm attitude

Successive Ghanaian governments’ attitude towards Islamic finance can be described as “lukewarm” and “cautious”. Although, there are always unfounded rumors about Ghana’s formal embrace of Islamic finance, but there is nothing on the ground to physically demonstrate the government’s seriousness. It appears the government lacks the political will to fully embrace Islamic finance.

No Islamic financial institution can operate in any given jurisdiction without an effective regulatory framework in place. To start with, there are issues of governance, regulatory, taxation, Shariah compliance and others, like recognizing the principle of profit sharing and allowing Islamic contracts to avoid certain terms which are not permitted, such as interest, to contend with.

These issues, of course, cannot be effectively addressed or tackled without the necessary amendments in Ghana’s financial laws. It should however, be noted that Ghana has a dominant and sophisticated Christian majority population, and this means the legislative arm of the Government is also dominated by Christian members of Parliament. The terrorist activities by some fanatical Muslim elements and criminal gangs in some predominantly Muslim countries, particularly, Mali, Burkina Faso and Nigeria have unfortunately dented the impression majority of Ghanaians has about Islamic finance, particularly, when it has to do with amending the country’s laws to accommodate aspects of the Shariah.


The real challenge now for proponents of Islamic finance in Ghana is how to win the support and confidence of the Christian majority population, and by extension, the Parliament to effect the necessary legislative changes in Ghana’s financial laws that will pave the way for the formal accommodation of Islamic finance as an alternative financial system in Ghana. This may take time, probably, a longer time. These basic challenges which readily come to mind must be overcome:

  1. Regulatory framework:                                                
  • Ghana’s current financial system is currently governed and regulated by laws that are clearly in opposition to the basic tenets of Islamic banking.
  • Lack of a robust regulatory framework to govern and regulate the operations of Islamic financial institutions.
  • The interest earned on fixed deposits is subject to income taxes, whereas the profit on Islamic banking deposits is treated differently.
  • Conventional financial institutions borrow from other banks and financial institutions to meet their short-term funding requirements, but Islamic financial institutions cannot do so because it involves interest.
  • Islamic financial institutions are required to closely monitor their investments in various businesses, as well as ensure that the investee firms are managed properly. This calls for expensive supervisory infrastructure.
  1. Dearth of Islamic finance professionals:

There is a serious dearth of Islamic finance experts and trained personnel in Ghana.

  1. Islamic finance literacy

Islamic finance literacy among Ghanaians generally is very, very low. There is a lack of awareness about Islamic finance. Most people mistakenly believe that Islamic finance is only meant for Muslims, whereas in climes like Malaysia, Nigeria, Kenya, UK and elsewhere, about 40% of the customers of Islamic financial institutions are non-Muslims. A great deal of hard work has to be done to dispel the myth that Islamic finance is only for Muslims and the notion that Islamic finance is associated with terrorism. Much harder work must go into raising the awareness among the professional and intellectual class that Islamic finance is a complementary, alternative and ethical form of finance. Public seminars and discussions are a good way to do this.


Islamic finance, with its widely recognized strengths in retail and commercial banking and experience in infrastructure, property, SMEs and agricultural financing, has considerable potential to become an important element in Ghana’s aspirations to be an Islamic financial services center in West Africa. Secondly, Islamic finance has the potential to facilitate further innovation and competition in the wholesale and retail banking sectors and to support Ghana Government’s commitment towards credit market diversification.

According to official sources from Ghana’s ministry of Finance, Ghana is currently facing a huge budget deficit of US$1.375 trillion, and requires a dose of foreign injection of funds to close this gap. Following the example of countries such as Malaysia, Indonesia, UK, France and Germany, Ghana could use Islamic financial products such as Sukuk (long term Islamic bond) to fund its budget deficits, infrastructure and other sectors.

Specifically, Ghana could attract the Middle East’s high investible surplus through Islamic banking and finance. The institutionalization of soft and hard Islamic finance infrastructure in Ghana may help attract foreign Islamic banks and conventional banks with Islamic windows to establish operations in Ghana; attract investments in Ghanaian assets and businesses from overseas Shariah investors and tapping into new funding sources through Sukuk and other securitized issues; fund managers establishing Shariah compliant funds for Asian and Gulf institutional and high net worth individual investors; local Exchanges providing Islamic listings platforms for domestic and international issues of Shariah compliant instruments; and Ghanaian based financial firms, professional services providers and educational institutions exporting their services into Asia and the Gulf.

Baba Yunus Muhammad is the president of Africa Islamic Economic Foundation. He can be contacted at

This article was first published in IFN Volume 20 Issue 4 dated the 25th January 2023.

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How Shariah-Compliant is Islamic Banking?




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Islamic banking has garnered significant attention globally, especially among Muslim communities seeking financial solutions that align with their faith. Rooted in Shariah law, Islamic banking aims to offer an alternative to conventional banking by adhering to principles derived from the Quran and Hadith. But how Shariah-compliant is Islamic banking in practice? This comprehensive blog post explores the core principles of Islamic banking, the mechanisms ensuring Shariah compliance, and the challenges and criticisms faced by the industry.

How Shariah-Compliant is Islamic Banking?

Core Principles of Islamic Banking

Islamic banking operates on several fundamental principles that distinguish it from conventional banking:

  1. Prohibition of Interest (Riba): The most well-known principle is the prohibition of Riba or interest. Instead of earning interest on loans, Islamic banks earn profit through equity participation, trade, leasing, or investment in Shariah-compliant projects.
  2. Risk Sharing: Islamic banking promotes risk-sharing between the bank and its clients. This is achieved through profit and loss sharing (PLS) contracts, such as Mudarabah (profit-sharing) and Musharakah (joint venture).
  3. Ethical Investments: Investments must adhere to ethical and socially responsible principles. Islamic banks cannot invest in businesses involved in activities considered haram (forbidden) such as alcohol, gambling, and pork.
  4. Asset-Backed Financing: All financial transactions must be backed by tangible assets or services, ensuring that speculative practices (Gharar) are minimized.
  5. Transparency and Fairness: Contracts and financial transactions must be transparent, fair, and agreed upon by all parties involved.

Mechanisms Ensuring Shariah Compliance

To ensure adherence to these principles, Islamic banks implement several mechanisms:

  1. Shariah Boards: Each Islamic bank typically has a Shariah board consisting of Islamic scholars and experts in Islamic finance. This board reviews and approves all financial products and services to ensure they comply with Shariah principles.
  2. Shariah Audits: Regular Shariah audits are conducted to assess and verify that the bank’s operations and transactions comply with Shariah guidelines. These audits ensure that any deviations are promptly addressed.
  3. Product Structuring: Financial products are carefully structured to align with Shariah principles. Common products include:
    • Murabaha: A cost-plus-profit financing structure used for purchasing goods.
    • Ijara: Leasing agreements where the bank buys and leases out assets to clients.
    • Sukuk: Islamic bonds representing ownership in a tangible asset or a pool of assets.
    • Takaful: Islamic insurance based on mutual assistance and shared responsibility.
  4. Continuous Education and Training: Islamic banks invest in educating their staff and clients about Shariah principles and the importance of compliance. This helps maintain a high standard of Shariah adherence across all operations.

Challenges and Criticisms

Despite these mechanisms, Islamic banking faces several challenges and criticisms regarding its Shariah compliance:

  1. Standardization: There is no universal standard for Shariah compliance, leading to variations in interpretations and practices across different regions and institutions. This lack of standardization can create confusion and inconsistencies.
  2. Replicating Conventional Products: Some critics argue that certain Islamic banking products are merely replications of conventional banking products with minor modifications to appear Shariah-compliant. This raises questions about the authenticity of these products.
  3. Limited Shariah Expertise: There is a shortage of qualified Shariah scholars with expertise in both Islamic jurisprudence and modern finance. This scarcity can hinder the development and approval of innovative Sharia-compliant products.
  4. Operational Costs: Ensuring Shariah compliance can be costly due to the need for Shariah boards, audits, and continuous education. These costs can make Islamic banking products more expensive than their conventional counterparts.
  5. Market Perception: Some potential customers remain skeptical about the genuineness of Islamic banking, questioning whether it truly adheres to Shariah principles or if it’s merely a marketing strategy.

To address these challenges and enhance Shariah compliance, several measures can be taken:

  1. Developing Universal Standards: Efforts should be made to develop and adopt universal standards for Shariah compliance. Organizations like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) are working towards this goal.
  2. Enhancing Shariah Governance: Strengthening Shariah governance frameworks and increasing the number of qualified Shariah scholars can improve compliance and innovation in Islamic banking.
  3. Transparency and Education: Increasing transparency in product structuring and operations, along with educating the public about the principles and benefits of Islamic banking, can build trust and acceptance.
  4. Innovation and Differentiation: Developing truly innovative and differentiated Islamic banking products that go beyond merely replicating conventional products can enhance authenticity and attractiveness.

Islamic banking, with its foundation in Shariah principles, offers a viable alternative to conventional banking for Muslims and ethically-minded individuals worldwide. While it faces challenges and criticisms regarding its Shariah compliance, ongoing efforts to standardize practices, enhance governance, and promote innovation are crucial for its growth and success. By addressing these issues, Islamic banking can better fulfill its promise of providing ethical, equitable, and Shariah-compliant financial solutions.

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Afghanistan Central Bank Joins Global Islamic Economics Forum in Malaysia




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The Afghanistan Central Bank, also known as Da Afghanistan Bank, has recently sent a delegation to Malaysia to participate in the Global Forum of Islamic Economics and Finance. This forum aims to foster discussions on the development of Islamic banking, support for small and medium-sized enterprises (SMEs), and the expansion of financial markets. Haseebullah Noori, the spokesperson for the Central Bank, emphasized the significance of this event, highlighting that representatives from central banks and financial institutions from various countries are expected to attend.

Noori stated, “A delegation from the Afghanistan Central Bank traveled to Malaysia to attend the Global Forum of Islamic Economics and Finance. Representatives from central banks, Islamic banks, and financial institutions worldwide will also participate in this forum.” This gathering presents an excellent opportunity for Afghanistan to strengthen its financial sector and align with global banking standards.

In addition to attending the forum, the Afghan delegation is scheduled to meet with several Malaysian officials to discuss establishing and enhancing bilateral relations. These meetings aim to address various economic challenges and explore potential collaborations that could benefit both countries.

Economic experts in Afghanistan believe that standardizing the banking system and developing Islamic banking are crucial for the country’s economic growth. Shaker Yaqoubi, an economist, remarked, “The more our banking system in Afghanistan meets global standards, the better we can align with the global economy. Regulated trade and investment will take shape, and given that Afghanistan is an Islamic country, Islamic banking is a crucial need.”

The Chamber of Commerce and Investment in Afghanistan also stressed the importance of addressing the challenges related to money transfers through banks during these meetings. Mohammad Younis Momand, First Deputy of the Chamber of Commerce and Investment, expressed his hopes, stating, “We hope the global community and the Central Bank’s proposals will address Afghanistan’s banking issues so that the problems we face with money transfers can be resolved.”

Abdul Nasir Rashtia, another economist, added, “The more we normalize our relations with the world and lift sanctions and restrictions, the better we can expand our international trade and provide more facilities for traders.” The lifting of sanctions and restrictions is seen as a critical step towards enhancing Afghanistan’s economic stability and growth.

Previously, the acting governor of the Afghanistan Central Bank met with the Deputy Secretary-General of the United Nations to discuss the negative impact of international sanctions on Afghanistan’s banking sector. The acting governor emphasized that these sanctions have hindered the country’s financial stability and urged for their removal to foster economic growth.

The participation of the Afghanistan Central Bank delegation in the Global Forum of Islamic Economics and Finance is a strategic move towards integrating Afghanistan’s banking system with international standards and promoting the growth of Islamic banking. This initiative aligns with the broader goal of stabilizing Afghanistan’s economy and fostering sustainable development through enhanced financial cooperation and economic integration.

By addressing key issues such as money transfer challenges and advocating for the lifting of sanctions, Afghanistan aims to create a more conducive environment for trade and investment. The focus on Islamic banking, given Afghanistan’s cultural and religious context, further underscores the importance of this financial model in the country’s economic landscape.

As Afghanistan continues to navigate its economic challenges, the efforts of the Central Bank to engage with international counterparts and seek collaborative solutions are vital. The outcomes of the forum and subsequent meetings with Malaysian officials are anticipated to pave the way for significant advancements in Afghanistan’s financial sector, contributing to the overall economic resilience and prosperity of the country.

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ICB Islamic Bank Faces Challenges in Repaying Depositors




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By Ameer Yaqub

The ICB Islamic Bank, which emerged from the collapse of Oriental Bank in 2008, is currently grappling with a severe liquidity crisis that has left it unable to repay depositors. This situation underscores the vulnerabilities within the bank and the broader challenges facing the Islamic banking sector in Bangladesh.

The crisis has had a direct impact on depositors. Abdul Hamid Mahbub, with a deposit of Tk 1,00,000 at the bank’s Moulvibazar branch, recently faced the stark reality of the bank’s financial troubles. “On Tuesday, I went to the bank with a cheque for Tk 55,000, but the branch manager said they had no money at the time,” Mahbub told The Daily Star. Similar stories are being reported across other branches, including in Dhaka’s Paltan and Karwan Bazar areas.

In a bid to mitigate the crisis, ICB Islamic Bank sought Tk 50 crore in collateral-free liquidity support from Bangladesh Bank (BB) on January 31. However, this plea was denied two weeks later due to the bank’s existing liabilities, which total Tk 425 crore. BB’s Off-site Supervision Department has since requested the Banking Regulation and Policy Department to take corrective measures, as the bank’s operations are severely hampered by the liquidity crunch.

The liquidity crisis is compounded by a range of systemic issues. ICB Islamic Bank is dealing with frozen deposits, a significant capital shortfall, and high levels of defaulted loans. As of the end of 2023, the bank faced a capital shortfall of Tk 1,823 crore, with 87% of its total loans amounting to Tk 790.4 crore classified as bad.

The crisis has also affected the bank’s ability to pay its employees. Currently, ICB Islamic Bank employs 350 people across 33 branches, and delays in salary payments have become routine. According to Muhammad Shafiq Bin Abdullah, the bank’s managing director, the influx of depositors seeking withdrawals has exacerbated the situation. “This year, we repaid our depositors Tk 50 crore,” Shafiq noted, emphasizing the unprecedented nature of the current crisis.

Legal complexities surrounding the bank’s ownership have further muddied the waters. Issues stemming from its previous owner, Orion Group, have left ambiguities regarding current ownership, and a related case is still pending in court. This uncertainty has hindered efforts to stabilize the bank and secure necessary funds.

ICB Islamic Bank’s roots trace back to 1987 when it operated as Al-Baraka Bank. It was rebranded as Oriental Bank in 2004 and later dissolved by the central bank in 2006 due to significant irregularities. The restructured bank renamed ICB Islamic Bank in 2008, saw Swiss ICB Group and Malaysian investors take majority ownership. Despite these changes, the bank has struggled to achieve financial stability.

Efforts are ongoing to address the liquidity crisis. Md Mezbaul Haque, executive director and spokesperson of Bangladesh Bank, highlighted that a large portion of ICB Islamic Bank’s funds are tied up with leasing companies, contributing to the liquidity shortfall. “We asked the Malaysian shareholder of the bank to inject fresh funds,” he stated, expressing hope that the crisis could be resolved soon.

ICB Islamic Bank’s struggle to navigate this crisis is a crucial test for the resilience of the Islamic banking sector in Bangladesh. While the bank’s management remains hopeful, the path to recovery will require strategic interventions, regulatory support, and renewed confidence from depositors and stakeholders.

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