Discussants at a two-day training workshop on Islamic banking and finance have asked the government to consider floating Islamic bonds to raise funds for development.
In a communique issued at the end of a two-day training workshop in Accra, the participants were of the view that since many sectors of the Ghanaian economy is in need of critical funds for development, the state can raise funds through the Islamic bond termed as ‘sukuk for development’ instead of borrowing at very expensive interest rates .
Countries such as UK, Nigeria, Malaysia, and Singapore have used the same Islamic bonds to develop many sectors of their respective economies.
The call comes at a time when the government is in dire need of funds to undertake development projects across the country.
Presently, although the government could rely on borrowing, it is constrained by the high interest charged and the conditionalities because of its new status as a lower-middle income country.
Subsequently, the participants have asked the government to review the existing law on banking liquidity reserve requirement to allow for the take-off Islamic banking in Ghana.
The participants also requested commercial banks to pilot Islamic banking practice using existing laws and tailor banking products by employing special purpose vehicles as agents for clients who prefer Islamic banking.
The communique called on the central bank to take concrete steps to draw a comprehensive Islamic banking and finance regulatory framework to include Islamic banking Act and establish the relevant supplementary guidelines to support the laws with recommended appropriate accounting treatment for Islamic financial industry.
The workshop, which was organised by the Global Institute of Islamic Banking, Insurance and Consultancy (GIIBIC), with support from the Alhuda Center for Islamic Banking and Economics of Pakistan, examined the Islamic banking and finance industry, Islamic commercial law rulings, sources of Islamic finance, differences between Islamic and conventional banking, Islamic financial products, and global overview of Islamic finance industry.
Other topics treated include the products and services of Islamic financial Institutions worldwide, sources of Islamic micro finance, principles of Islamic microfinance and the role of Islamic microfinance in alleviating poverty in Africa.
“In order to effectively promote Islamic banking and finance in Ghana; there is the need to further develop human capacity and learning of Islamic Financial system,” the communique stated.
“The public and financial institutions also require professional development programmes and related developmental activities geared towards capacity development,” it added.
The participants recommended that Islamic banking and finance was a tool for financial inclusion, in addition to its primary role as a viable economic instrument in comparison to interest-based, or debt-based conventional financial system.
It also noted that Islamic finance created financial equilibrium by helping debt-ridden and other excluded groups to participate in the financial stream.
The communique noted that the country could attract surplus funds from oil-rich countries in the Middle East to fund development if administered according Islamic finance business principles.
“Banks and financial institutions in the countries need to explore the potential of Islamic banking market, by launching pilot project (Islamic banking products) to test the market”, the communique stated.
It, however, noted that, difficulties may arise when establishing an Islamic banking product in Ghana using banking rules originally made to regulate and supervise conventional banks.
The Director-General of GIIBIC, Sheikh Abdul-Muumin Saeed, later told the Graphic Business in an interview that the Bank of Ghana, some commercial banks and policy makers in the country had shown keen interest in promoting Islamic banking, and finance in Ghana.
This, he said, could help the government to diversify its sources of funding to include what he called ethical financiers and investors.
Islamic financeirs based on the equitable distribution of risk and returns between suppliers and users of funds.
In addition, an Islamic banking in Ghana will help include sizable percentage of people looking for moral and ethical, interest-free banking and financial products into banking and finance stream thereby raising the country’s GDP in the years to come.