Adnan Adams Mohammed
The Governor of Bank of Ghana, Dr Johnson Asiama, has strongly affirmed a resolve to put in place all necessary framework to operationalise Islamic financing products, basically Islamic banking, in Ghana very soon.
He indicated that, the bank’s resolve prompted the engagement of Professor John Gatsi as an Advisor purposely to facilitate the process for introduction of Islamic banking. Professor Gatsi, the Dean of the University of Cape Coast’s Business School is an acclaimed economist and is well known for both his knowledge of and advocacy for Islamic Banking in Ghana.
At the 124th Monetary Policy Committee press briefing in Accra last week, the Governor revealed that “l must say that we have internal capacity and processes (to implement Islamic Banking). We have done a few studies, the Head of Banking Supervision here has gone through a lot of programmes and he is very comfortable with it. The entire Banking law, Act 930, makes provision for Islamic banking but there are some lapses – for instance the establishing of the Sharia compliance board that was not captured rightly. That is why Prof Gatsi and his team who have done some work in that area will be doing some work in that regard. To ensure that we are able to operationalize Islamic finance, especially Islamic banking”, Dr Asiama emphasised.
“There are also the other aspects of Islamic financing involved. So, we are working on it. Hopefully, very soon when we are ready, we can consider licenses to establish Islamic banking.”
The Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) promulgated in 2019, which repealed the previous Banking Act, 2004 (Act 673), provides a comprehensive framework for regulating banks and specialized deposit-taking institutions (SDIs) in Ghana including Islamic banking. However there are no Islamic banks licensed to operate in Ghana yet.
While there are no fully established Islamic banks in Ghana, several institutions offer Islamic banking services. These include financial institutions like Access Bank Ghana, Wenchi Rural Bank, Ghana Islamic Microfinance, and Salam Capital. Ghana Islamic Microfinance, which began as an NGO, is the only sharia-compliant financial institution in the country.
Meanwhile, Prof. Gatsi, a consistent advocate for Islamic finance, has over the years underscored the need for Ghana to adopt Islamic banking to promote financial inclusion and freedom of choice of financial products and services.
According to him, Islamic banking would considerably reduce untold poverty and burdensome project finance facing the country, whilst ensuring the promotion of social justice.
He maintained that Islamic banking has contributed to private-sector finance and governmental project finance through the public-private partnership (PPP) framework, stressing that PPP would enhance the diversification of infrastructure finance.
“It is high time, as a country, we began to explore Islamic banking options to provide some capital for infrastructure”, he added.
Prof Gatsi made these submissions at his inaugural lecture which was on the topic, “Islamic Banking Options: Exploring an Inclusive Alternative or Complement.”
Prof. Gatsi, who is also the Dean of the School of Business at University of Cape Coast, reiterated recent calls for the Banks and Specialised Deposit-taking Institutions Act, 2016 (Act 930) to include ethical banking and achieve financial inclusion. He argued that the nation would bear the full brunt of hardship if the Bank of Ghana failed to amend the law to incorporate Islamic finance.
In the view of Prof Gatsi, the Act was enacted for conventional banks and needs to have legal flexibility for the governance structure, including Islamic banking.
“In other parts of the world, the hybrid model existing frameworks allowed conventional banks to create ethical finance widows and thus has allowed them to benefit from the best of both worlds…We need our legislation to be adjusted or we will fail to reap the overwhelming benefits that ethical finance provides,” he explained.
To him, the growth of Islamic banking in non-Muslim countries proves that its benefits go beyond the issue of ethical finance. He pointed out that Islamic banking should be viewed from a financial inclusion perspective and not from a religious viewpoint.
He mentioned environmental degradation and alcoholic beverages as some of the prohibitions that make the size of Islamic banking transactions smaller than conventional banking.
Prof. Gatsi mentioned capacity building for court staff, the composition of the membership of the Shariah Supervisory Board as well as the lack of uniformity in the application of Islamic law by different Muslim faiths as some of the challenges that would face the establishment of Islamic bank in Ghana.
He, therefore, proposed that the Bank of Ghana (BOG) should create the environment for the adoption of Islamic banking, as well as contribute to meeting the SDGs.
“The Shariah Board should reflect secular democratic values. Additionally, Islamic banking will deepen entrepreneurial support,” Prof. Gatsi stated.
