Let's consider some principles of Islamic Banking - Veep
Accra, Feb. 27, GNA - Vice President Aliu Mahama on Thursday tasked financial institutions to consider adopting some of the principles of Islamic Banking to assist the private sector to be vibrant.
Opening the first seminar on Islamic Banking and Financing in Accra, Vice President Mahama said high interest rates charged by conventional banks was inimical to the growth of businesses, adding that developing countries such as Ghana had to be more ingenious in designing measures to assist their economies to grow.
Islamic Banking, which operates on the doctrines and ethics, regulations and rules of economics of Islam, forbids the taking of interests.
It is based on a sharing of profit and loss system and loans are granted on the approval of trustworthiness of the applicant, business acumen and the feasibility of the project.
Vice President Mahama explained: "It is evident in the Koran business transactions enjoy great deal of attention from Islam.
"Honest trade is permitted by and blessed by God. This may be carried out through individuals, companies, agencies and the like. But all business deals should be concluded with frankness and honesty." Vice President Mahama, therefore, welcomed the seminar, organised by an Al Furqun Foundation, a religious NGO, saying it was an appropriate platform for financial experts, policy makers, corporate leaders and private sector operators to brainstorm and make recommendations for the financial sector.
The Executive Governor of Bauchi State, Nigeria, Dr Ahmadu Adamu Mu'aza, said there were 250 Islamic financial institutions in more than 50 countries.
The institutions have a total deposit of more than 80 billion dollars and assets worth 200 billion dollars, he said.
"The annual growth rate has been in the region of 15 per cent compared to about 10 per cent for conventional financial institutions," Mu'aza said.
"Superior returns have also been shown even on the capital market. The Dow Jones Islamic Market USA index posted an annual total return of 27 per cent from 1996 to 1999, compared with 24 per cent for the 'S&P 500' for the same period," he quoted from the Washington Times of 11th July 2001.
Dr Mu'aza said Islamic Banking was a better system for developing countries because interest rates cripple weak economies. He explained: "Between 1973 and 1993, third world debts grew by about 20 per cent per annum from 100 million dollars to 1.5 trillion dollars. Of this 1.5 trillion dollars, as at 1993, only 400 million dollars was actual borrowed money."
"The rest was runaway compound interest. If Third World debt continues to compound at 20 per cent per annum, then 18 years from 1993, or 2011, third world debt will be 117 trillion."
Dr Mu'aza urged Ghana to join the 15 African countries with Islamic financial institutions, saying it would be prudent for the country to adopt a practical and realistic model that would best meet her needs. Mr Emmanuel Asiedu-Mante, Deputy Governor of the Central Bank, said the supervisory institution would license every bank that had the ability to be liquid, solvent and profitable so that the deposits of clients would be safe and well managed.
He called for more education on the concept of Islamic Banking, conceding that the request to set up one in Ghana about two years ago was not well received because of lack of knowledge about it, adding that it might be necessary to change some of the banking regulations to allow the introduction of Islamic banking.