The governor of The Central Bank of The Gambia, CBG Mr. Amadou Colley has told a sub-regional meeting that with about 400-500 Islamic banks worldwide, they manage close to US $1 trillion worth of assets revealing that this figure is estimated to rise by US $4 trillion by 2020.
Giving records, he informed his audience that it was in 1997, that the first Islamic Institution called the Arab Gambia Islamic Bank (AGIB) was established through private participation including the Islamic Development Bank (IDB) in The Gambia.
With a decade of operations in the Gambian soil, he said the bank was able to mobilise 25,000 depositors with a total deposit of D400 million.
AGIB, governor Colley said the bank engaged in products such as murabaha, mudarabah, musharakah, wilaka among other products.
CBG governor Colley was delivering his keynote address at the opening ceremony of the regional course on Rudiments of Interest Free (Islamic) Banking Organisation.
The regional course as held at the Paradise Suites Hotel organised by the West African Institute for Financial and Economic Management better known as WAIFEM.
WAIFEM was established in July 1996 by the Central banks of The Gambia Ghana Liberia, Nigeria, and Sierra Leone principally to build sustainable capacity for improved macroeconomic and financial management in the constituent countries.
According to governor Colley, Islamic banking, as a vibrant of interest free banking is a system of banking that is bond by Shariah (Islamic Law) and prohibits the taking or payment of interest.
In its simplest form, he said Islamic banking requires that financial products from mortgages to savings account saying that it have to be structured to comply with shariah law under the Quran.
“It is very evident that there has been significant growth in Islamic financial services in recent years and there is every reason to expect that this growth will continue at a rapid pace.”
Clearly “there is expanding demand for these products, and a closely associated desire on the art of banks, including non-banks, to provide Islamic financial services”, he positioned.
From 2007 through 2009, Islamic banks’ assets grew, on average, faster than conventional banks’ assets in major markets, CBG governor stated.
This, he went on relatively higher rate of growth, along with the tendancy to avoid excessive leverage and risk taking have some consumers, even non- Muslims, a new appreciation of the sector.
He told the meeting that since the beginning of the millennium it has brought about fast development in Islamic financial products. In addition, professional bankers and Shariah experts have been breathlessly racing to invent new Islamic financial products that mimic or replace every single interest- based contract that comes in the conventional market. .
Although the elements that are usually emphasised at meetings like these are different between Islamic and conventional banking adding that there are some fundamental principles that apply equally to both, he made his point clear to his audience.
These, he said include strong corperate governence, rigorous risk management and sound capital adequately requirements which are essential ingredients to ensure the safety and soundness of any financial system.
The increasing integration of Islamic financial services into the global financial fabric only strengthens his point.
Islamic banking, he stated that has emerged and evolved as a viable and competitive component of the overall financial system to drive growth and development throughout the world.
Governor Colley noted that the Middle East and Asia pacific regions with well developed Islamic financial system, they have remarkable economic growth attributing that to the Islamic financial banking.
A case in point, he gave Malaysia as an example stating that Islamic banking contributed positively towards Malaysia’s economic growth.
On home front, he said the government of The Gambia, realising the potential of Islamic banking in The Gambia given its larger Muslim population, has engaged the Islamic Development Bank (IDB) in partnership to develop the necessary infrastructure to accommodate Islamic banking in the country, said governor Colley.
This partnership, Governor Colley buttressed, has resulted in the revision of the Financial Institutes Act 1992, now the Banking Act 2009. The relationship facilitated the creation of a legal framework for the establishment of Islamic banking in The Gambia.
To further deepen the financial system and create an investment outlet for the Islamic bank and other Sharia compliant investors, he said the Central Bank of the Gambia developed an investible Islamic instrument called the Sukur Al Salam in 2007. The instrument, he went on had a ‘yield’ comparable to the treasure bills gained popularity and attracted investment from the Islamic and conventional banks.
When he took his turn, Professor Akpan H. Ekpo spoke at length about the importance attached to the course saying that the object of the course is to provide a board understanding on rudiments of Islamic banking to participants.
The course will also provide clarity on the Shariah requirements and the avoidance of ‘RIBA’ in modern day banking business.
He added that in mordern-day Islamic banking started over three decades ago, with the establishment of the Islamic Bank of Dubai in 1975.
Other banks in the Middle East entered the market, and Islamic banking eventually spread to Asia, Europe, America and the rest of the world.
He lectured that Islamic banking or non-interest banking model which is based on profit and loss sharing system adding that it rests purely on Isalmic doctrine of ‘universal permissibility’ in business dealings, which he stated that everything is permissible unless it is clearly prohibited.
He continued, Islamic banking is expected to give depositors another choice of where to invest their wealth adding that the customer and the bank share the risk of any investment on agreed terms and divide any profit that accrue there form.
In conventional, he said that borrowers are at times rendered miserable and frustrated leading to failure as a result of overbearing interest rates.
He concluded by expressing his immense gratitude to the Gambian leader president Yahya AJJ Jammeh and the people of The Gambia for hosting the regional course.
Mr. Ogbonnaya Agu, programme manager gave the introductory remarks and Dr. Udoma Afangideh, senior programme manager WAIFEM delivered the vote of thanks respectively.
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