The Managing Director of Capital and More Microfinance Company Limited, Akosua Oduma Oppong-Tawiah has concurred with the Central Bank of Ghana (BoG) on its decision to issue the first Islamic banking license in the country by the close of the year.
She however noted that the decision is long overdue since the introduction of Islamic Banking in Ghana will not only extend the availability of credit to the unbanked, it will also enable financial inclusion.
In an exclusive interview with Akosua Oduma Oppong-Tawiah in her office on the idea of the introduction of Islamic Banking in Ghana, the versatile and intelligent MD noted that Muslims form about 30% of Ghana’s population and if they are excluded from the mainstream banking sector due to access to credit and the interests being charged, then the industry has a long way to go.
According to her, Islamic Banking in Ghana would serve as a means of financial and economic empowerment which would at the end contribute significantly to the lives of the people.
The business model of Islamic banking is based on partnership and not on interest taking, which is forbidden in the Koran and Islamic banks do not finance projects that are considered not to comply with the principles of Sharia
Although some players in the industry are a bit skeptical about the whole thing, considering its business module, and how business leaders are embracing it to the effect that most are willing to migrate from their existing banks for Islamic Banking, Akosua Oduma Oppong-Tawiah believes the move will change the face of banking in the country.
“For me it is good to have this kind of bank in the country because of the role religion plays in our daily lives. As long as we have Muslims in Ghana, we must bring out products that is tailored towards their beliefs, you know most of them will prefer going to use the Islamic bank than the traditional ones of paying interest, in that way we are including them, also in the mainstream banking system,” she said.
According her, Islamic banking also has the potential to foster greater financial intermediation and inclusion, especially among Muslim populations that may be underserved by conventional banks, and to facilitate lending in support for small- and medium-sized originalities.
She also averred that, the introduction of Islamic Banking will give traditional banks the opportunity to reconsider their products and services.
According to her, Capital and More is seeing that as a challenge since it is repositioning itself to reengineering their products to those coming in and to also maintain their existing customers from living.
When asked if Capital and More will consider cutting down its interests on credit if possible, she said, her company will look at products it has since there are depositors whose finance gives the company huge traffic which are used in other portfolios, and hence if there is the need, that will be considered.
Akosua Oduma Oppong-Tawiah also mentioned that the news of Islamic Banking in Ghana will also give them the opportunity to create solutions in house so as to change and adapt to the new developments in the industry.
She called on the players in the industry not to see the emergence of Islamic Banking as a threat to their existence but a great opportunity reposition to become competitive and innovative.
It is established that one of the most famous principles of Islamic Banking is the lack of interest, but one has to somehow employ that money into productive use and then earn a return on that money.
Research has shown that there is a growing hunger for Islamic finance as approximately 30 per cent of the Muslim population around the world would be moving into Islamic banking.
Islamic banks are also not allowed to trade in financial risk areas or deal in mortgage-backed securities or credit-default swaps.
The International Monetary Fund (IMF) has stated that Islamic finance assets grew at double-digit rates during the past decade, from about $200 billion in 2003 to an estimated $1.8 trillion at the end of 2013.
According to a study from the IMF after it compared performance of Islamic banks and conventional banks during the recent financial crisis, it established that, Islamic banks has stronger flexibility during the global financial crisis.
Yet, the procedures of Islamic banks give rise to a unique set of risks, in addition to the standard risks associated with banking activities such as credit, market, liquidity, operational and legal risks.
The industry also faces additional risks related to the business model and the nascent nature of the industry. For instance, managing liquidity risk is more difficult for Islamic banks when there are limited or no Shariah compliant financial markets and Lender of last resort facility.
Islamic Banking is currently being operated in some European countries.
Source: Prosper Agbenyega