Islamic Banking: Prof Gatsi proposes creation of Shariah Supervisory Board
Professor John Gatsi, Dean of the Business School of the University of Cape Coast (UCC), has proposed the formation of a Shariah Supervisory Board to oversee financial products offered by Islamic Banks in the country should Ghana decide to practice Islamic Banking.
According to him, the Board will ensure that all financing products by Islamic Banks comply with the principle of Shariah laws notably the non-payment of interest on funds as in the case of conventional banking.
Speaking to norvanreports in an exclusive interview, Prof Gatsi further averred the Board will also determine the proportion of profit made from projects to be contributed towards Zakat which is similar to Corporate Social Responsibilities undertaken by companies.
Adding that, the Zakat, could be used to finance infrastructure in the country’s Zongo Communities.
“The Board will ensure that Islamic Banks comply with the Shariah law, and also determine how much to contribute to Zakat to build infrastructure for the Zongo communities,” he remarked.
Meanwhile, Prof Gatsi has opined that the practice of Islamic Banking in Ghana can help reduce the country’s debts and significantly impact its debt-to-GDP ratio.
He averred that countries that practice Islamic Banking have an average debt-to-GDP ratio of 40%.
“Islamic Banking aids practicing countries with their public debt management leading to reductions in their public debts as the debt-to-GDP ratios of such countries average 40%. Countries such as Saudi Arabia, UAE, and Algeria that practice Islamic Banking have debt-to-GDP ratios of 23.8%, 24.2% and 32% respectively,” he remarked.
“Islamic Banking can help reduce Ghana’s debts, there should be a rethinking of the country’s debt management structure to include other financing sources such as Islamic Banking, sukuk, and others,” he added.
According to Professor Gatsi, Ghana’s debts continue to increase because of the country’s reliance on the Eurobond market which comes with the burden of interest repayments.
Adding that, the misallocation of Eurobond proceeds and the use of the proceeds on projects that are not self-financing, also contribute to the country’s growing debts.
However, unlike the proceeds acquired from the Eurobond market, funds from Islamic Banking instruments are not permitted to be misallocated and are also strictly used in revenue-generating projects.
“Islamic Banking is structured in a way that, if funds are invested in a project, the project itself generates revenue to repay for the amount invested and also revenue to be shared. So you don’t have the burden of going to look for money to pay bondholders.
“Islamic Banking is mainly involved in projects that are self-financing and pays for itself and gives lower burden of debt,” he noted.
