Despite the policy by Bank of Ghana (BoG) not to license Islamic Banks to operate in the country, there are good reasons for the central bank to permit these no-interest-on-loans financial institutions, for which some players in the Small and Medium Enterprises (SMEs) sector and experts are urging BoG to rescind its decision.
Since the early 2000s, BoG has refused to give licences to Islamic Banks that approached it to do business in the country. Some attributed the central bank's stance to persistent lobbying by the commercial banks which stand to lose when Islamic Banks operate in Ghana.
Under the Islamic system of banking, a borrower only needs to repay the amount owed to the bank. The borrower can also choose to pay the lender a small amount of money to serve as a gratuity. Since Islamic Banks were introduced in Nigeria, many SMEs have been boosted with accessible and affordable credit. Several individuals have also accessed credit from these banks.
Now, in Ghana, some owners of SMEs, who will enjoy the interest-free credit facilities that Islamic Banks offer to expand their businesses, have renewed their calls on BoG to back down on its entrenched position and legalise the operations of these banks. And their calls have been supported by some forward-looking bankers and experts. One such expert is a financial analyst, John Gatsi, who has asked BoG to reconsider its policy and allow the introduction of Islamic Banking as happens in Nigeria. John Gatsi told Accra-based CitiFM that "interest rates are high and cost of doing business is also high and the cost of borrowing is not the best hence the call for the introduction of Islamic banking where there will be no interests."
Mr Gatsi said many people are calling for the introduction of Islamic Banking in the country as an alternative to the high interests charged by the commercial banks. He noted, however, that there are several obstacles which may affect the introduction of Islamic Banking because "you cannot introduce a new banking system into the conventional system without allowing the Central Bank to lenience the operations of such businesses. So as at the now, the Central Bank is not having any discussions with respect to Islamic banking."
He said there are advantages for financial intermediation when Islamic banking is introduced. "If you look at what the Muslims tell us, it means that without the presence of Islamic banking in the country, savings mobilization is hugely affected because there are a lot of Muslims based on their faith who do not have any dealings with the banking system even though they engage in productive economic activities", Mr. Gatsi said. Mr Gatsi urged the Muslim community in the country to set the tone for this discussion although they are doing a lot of underground work "but they need to bring the discussion to the national level."
Another expert who supports Islamic Banking is the Managing Director of Zenith Bank Ghana, Mr Daniel Asiedu. Mr Asiedu has revealed that Islamic Banking may be introduced to the public in future."If it is a product that has done well in other economies, why not, maybe it could do well." He stated that when it is convenient, Zenith Bank would introduce the interest-free banking in Ghana.