For many years, a number of Ethiopian Muslims have been demanding the establishment of Islamic bank and recently they have received green light from the incumbent to open such bank in the near future.
It is true that a large number of financial organizations operating here have been offering some sorts of non-interest banking services , but many have been saying that it is not enough and calling for active and effective financial inclusion across the country. Of course, opening Islamic bank will not by itself bring about the desired and modern financial system in the country , however, it would support the efforts to have many million bank customers and to modernize the country’s banking system as well.
At this juncture, some individuals are getting ready to establish the first Ethiopian Islamic Bank very soon, therefore, there is a huge financial need to be addressed and an urgency to introduce the new set goals in relation to uphold the principles of Islamic or Sharia law in this end.
For sure, such bank will function based on two fundamental principles of Islamic banking i.e. sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors.
Indeed, the nation‘s Islamic bank is highly expected to play its irreplaceable role in securing much needed development financing than ever before. Moreover, it needs to work hard in winning high level political support for the common goal and bringing about policy changes based on good practices and lessons learned.
Apparently, there have been a quite number of initiatives and plan of actions aiming at attracting Muslim bank customers nationwide. Nevertheless, inhibitive policies and a weak legal framework constrain the expansion of interest-free banking in the country.
Of course, Ethiopia will benefit a lot when it becomes officially a member of the Islamic Development Bank. This is because it will not be missing out from benefiting from the huge amount of revolving funds it earmarks for investments and loans. One must understand here that the Islamic banking is not meant to replace regular banking but offer an alternative.
It is a crystal clear that apart from the constraints of the legal framework,there is also lack of the awareness of the system and the understanding of how Islamic banking would integrate itself with the conventional banking. Therefore, the concerned bodies need to come up with new plan of action and agendas to cope up with the aforementioned setbacks at this particular period of time.
Also they need to be at forefront of stopping the illicit financial flows manifest in African countries and it must show ways of utilizing such revenues for the better future of Ethiopia.
Yes, establishing Islamic bank by itself is not enough, there should be an institutional capacity to effectively utilize the finances that are supposed to create awareness about the bank’s services carrying out activities aiming to narrowing the existing awareness gap about the interest –free banking system in Ethiopia for once and all.
In general, the establishment of Islamic bank would shoulder responsibility in terms of providing the needed funds for various development activities and enhancing financial inclusion in a permanent manner.
The Ethiopian Herald, August 13/2019
