Monday, November 3, 2008

Zambian Islamic banking will help people

Zambia Daily Mail - Wednesday, 22 October 2008

THE Bank of Zambia (BOZ) says the establishment of Islamic banking services in the country will help people to have access to money for capital investment without paying interest.

BOZ Governor Caleb Fundanga said the central bank recently undertook a survey on the Zambian market, which revealed that 80 per cent of respondents intended to introduce Islamic banking products in the near future.

“The introduction of Islamic banking would come with its own challenges, for us at BOZ this entails further strengthening of our supervisory capacity,” Dr Fundanga said.

He was speaking in Lusaka yesterday at the official opening of a two-day conference on Islamic banking held at Pamodzi hotel.

Dr Fundanga said in a speech read for him by BOZ deputy governor for operations, Denny Kalyalya, that Zambia would welcome the Islamic banking system because of its benefits to would-be customers.

Dr Fundanga said the rapid growth of Islamic banking raises a series of important questions, such as whether Islamic banking system should be regulated differently from conventional banking.

“We would welcome this challenge and hope to rise to the occasion by providing adequate supervisory infrastructure and an environment for conducting good business,” Dr Fundanga said.

He said modern Islamic banking was relatively new to most country’s rules for financial accounting, bank governance and lending standards.

Dr Fundanga said Zambia had been grappling with non-payment of loans by people that borrow money from banks, hence the services to be offered by Islamic banking system would assist people to access funds for capital investment.

“Of particular importance to Zambia is an arrangement where borrowers can borrow without paying interest.

Lending rates are very high in this country, thereby making borrowing for capital investment prohibitive…therefore an arrangement where borrowers can access funds for investment without paying interest is a worth exploring,” Dr Fundanga said.

He said the last decades had witnessed the rapid growth in Islamic banking both in terms of size and number of players.

Dr Fundanga said government recognises that the limited access to financial services and low number of products available to different sectors of the economy was hindering development potential of Zambia’s economy.

He has called for revitalisation of the financial sector to make it in line with the challenges of accelerated and sustained investment in key sectors of the country’s economy.

Dr Fundanga commended financial institutions in Zambia for rising to the occasion through broadening their scope of financial services beyond the traditional customers to include previously unbanked segments of society.

He was hopeful that the conference would provide an opportunity for stakeholders in the financial sector to share knowledge and experiences on how best to promote financial diversity and inclusiveness to all sectors of the economy by introducing and incorporating Islamic banking.

The Islamic banking system is being practiced in 50 countries worldwide.