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Islamic Banks to enter financial sector in Ethiopia
By Kirubel Tadesse
Finally responding to a strong public demand, the National Bank of Ethiopia (NBE) is about to approve a directive that paves the way for the establishment of Islamic banks.
The directive also opens doors for currently operational commercial banks to create an interest-free banking wing. “Existing banks may create interest-free banking windows and Ethiopian nationals may establish a bank exclusively engaged in interest-free banking,” the NBE draft directive reads.
To accommodate muslims, who are by Sharia’h – Islamic law – prohibited from taking or giving interest (riba), commercial banks are currently offering zero interest. However, fully-fledged establishments of Islamic banks, which offers the owners of capital to share the profits made by the entrepreneur who comes up with investment projects, is an untapped concept for the local financial sector. The sector will, according to Prime Minister Meles Zenawi, remain closed from foreign banks involvement.
The 2008 Banking Business Proclamation has already crafted a room for non interest banking. However, particulars on the regulations of such services were left to be covered by National Bank directive which, two years late, has come now.
According to sources, NBE’s two page draft directive entitled Directives for Conducting Interest-Free Banking, has already received feedback from stakeholders and should be approved in a few weeks time.
The impending approval is expected to enable some already under progress initiatives that envisages establishing Islamic banks.
As per the NBE draft directive interest-free banking operations may include modes of advancing funds on a profit-and-loss sharing basis consistent with the Sharia’h law.
Ibrahim Miftah, an economist, explains that what makes profit- sharing permissible in Islam, while interest is not, is that in the case of the former only the profit-sharing ratio and not the rate of return itself is predetermined.
“It has been argued that profit-sharing can help allocate resources efficiently, as the profit-sharing ratio can be influenced by market forces so that capital will flow into those sectors which offer the highest profit sharing ratio to the investor, other things being equal,” Ibrahim in his article, pending printing, explained.
The NBE directive also stipulates that interest-free banking may include the modes of finance which are used for purchase or hire of goods, including assets, and services on a fixed return bases. Among such recognized operations one is Murabahah which means a contract for the purchase and resale of goods with the resale price being determined on a cost plus basis.
IN such arrangements intisar (or Istisna) and salam are also included. The latter is defined to equate a contract featuring advanced payment against delivery of goods: the financing is usually used for commodities. The former – intisar –is a contract under which a buyer place an order for goods to be manufactured for delivery at a future date.
The upcoming directive is expected to boost national savings because first time depositors are expected to be encouraged by the new Islamic bank offering. PM Meles recently said the next five year economic plans to boost the current 9.4 per cent of national saving shares in the economy to at least 17.4 per cent and to 21.3 per cent shares if possible.
Though new for Ethiopia, interest-free banking has long global history. The first private interest-free bank, the Dubai Islamic Bank, was set up back in 1975 by a group of Muslim businessmen from several countries.
After the establishment of the first private commercial bank in Dubai, more than fifty interest-free banks were established in Muslim countries and as well as in European countries such as Denmark, Luxembourg, Switzerland and the UK.
This is great news, investment within Islamic in regions in Ethiopia will rapidly grow. I will give credit where it’s due. Muslim people of Ethiopia are finally getting a voice. Truly showing the change in Ethiopian demographics
Greater Ethiopia now I see. Well done although it took two years late to reach here. I commend those who made it happen in this ignorance ridden country.
Now, we expect a muslim president.
Wooooooow, I can smell a real growth now!! what a nice move by Ethiopian National Bank and its workers!!
Even if this kind of Banking system should have been opened long time ago, we should still appreciate a system that is going to include more than 55 millions of Muslim Ethiopians, who have been a back bone of Ethiopias ecnomy for a century.
Lets all of us be patients and optimistics as the Islamic bank (according to the best 21century economist from UK and Germany) is known to be the only BANK system on planet that nevre hit by Financial crisis nor it go bancrapcy.
The new Islamic nation of Horn Africa is created and being converted by the traitor Meles to please his masters in the Arab countries. What is the purpose of Islamic bank to trade and smuggle Al qaedia, Al shebab and Issayas???
Al Meles Shebab Zenawi should be the board of directors chairman at the Islamic bank. This is the stupidest move by the Government I have ever seen.
Woooooow, what a nice move!
This thing should have been done long time ago, any ways it is never be too late to start things that is proven to be PERFECT such as ISLAMIC BANK!!!
Since,according to 21st century economists,ISLAMIC Financial system or BANK is proven to be the only bank that never go bancrapcy nor it hit by financial crisis.
I realy here smell and predict a big ETHIOPIAN economic GROWTH since the best bank emerging and the cuntry is opening its door to 50+ muslim Ethiopians, who has been the back bone of economic players with only given little opportunity
SO those all people who are not born to become cynics or pustimistics but learn it to be, it is a day you should be celebrating! be optimistic and you will have nothing to fear with the Islamic bank.As USA’s late Presidant Rosvelt said to AMERICAN ppl during economic depresion yers around 1929-31, you have nothing to fear but fear itself! so you Ethiopian cynics if u have to fear, you should fear to the above saying!
All Ethiopian muslim Brothers and sisters, Enjoy your Economic Freedom, as the father of modern econmy Adam smith put it Free economy will increase the profitabiltiy and Increases the wealt o the nation.
From now on Ethiopia’s economic growth will be the true one!!!
I wish all the best for all Ethiopians and Ethiopia it self!!!
I am not comfortable with this idea. In Egypt, the Islamists have used this banks to wield political influence. I also suspect that a lot of cash will flow from the Gulf to this type of institution to make it stronger than the average commercial bank.
I wish I were wrong.
ability without gentlity stupidity.
If U not comfortable with Islamic bank. U can have Serbian and Armanian Orthodox BANK in Meqele and Gonder
Haa haaa haa haaaaaa
This is a great news to hear from Ethiopia if we strive for the real economical growth this is the a step forward. well done TPLF
You’re so terrified by orthodox Christians, I wonder why..
Gonder,and Mekele where civilization born. Just to let u know.
A banking system which does not charge interest and still be profitable sounds good.It should be a model to other banks. Any banking system that will benefit all peoples in the country should be welcomed. The question is this banking system is going to serve every Ethiopian or only the Muslim community? I hope it serves every one which is an Ethiopian tradition.
Al Meles Zenawi has nothing to do now. He finished about ethnic engineering. He is now engaged in religions engineering.
Why does a religion need a separate bank?
According to orthodox teaching, even christianity interest is not allowed. This means both muslims and christians can have the same bank that deliver the same service.
So it is not necessary to have an islamic bank or an orthodox bank. This is crazy. Ayee Meles Zewawi,
He land-locked Ethiopia
He divided the land by ethnic
Now is diving the bank by religion, then we need now Protestant banking, orthodox banking, Johovah banking, pente banking, lurthran banking, catholic banking, Bahai banki, Budhist banking, Judaic banking, sun banking, moon banking, tree banking, river banking, birds banking, Adventist banking, Jesuit banking, EPRDF banking, Tigrean banking, Amhara banking, oromo banking, Gurage banking, Anuak banking, Wolaita banking,…. Meles Zenawi is a crazy man.
Does Meles know the bible also teaches interest taking and giving is not allowed?
This is inevitable in this globalized economy and sitting near the ocean of Islam with large lakes of Islam with in the country itself.
One positive outcome of Islam’s domination will be making the Christians truly think about their own God whom they currently approach lukewarmly. As Islam get stronger financially and politically, Christians will be forced to run to their closets and kneel down in-front of their God. That could be more beneficial to them than their false domination now. This hold true for the rest of the world that was bragging to be Christian as a whole.
Thank God, Jesus Christ, for allowing scourges like Islam to flourish from time time. As in the past, Christens will be purified by these adversities. When the church is persecuted (soon will be forced to pay taxes to the Caliph), its followers will realize they are nothing without the mighty hands of the Lord!
oh it is nice to be open this bank but after 2 yere we will depor them all moslime from our lovely ethiopia B/c this is enought for them we will send to sudan they can be a slave for sudanise–but for us we will find another slave like them.
Ehio chiristiyan weak up this is the time to wach out things
Gragn ahmed [Visitor]
“Greater Ethiopia now I see. Well done although it took two years late to reach here. I commend those who made it happen in this ignorance ridden country.”
“Now, we expect a muslim president.”
I hope u r starting to appreciate this country you previously threaten it and its people so much because of ur small talk with Assta.
Although, you forgot to snap your finger after your last statement,
We will work on the Presidency
Well such kind of banks might bad for the security of the country.
since the Muslims have most of the cash it is only right for them to have a bank that works in their principle. He when was the last time you saw a christian milionare in Ethiopia and think of you muslim neighbors yep they have a beutiful house and so on. they are hard working and good luck to them. one of these days i will join their religion.
Ethio, there are no 55 million muslims in Ethiopia, you just expressed your wish. Muslims in Ethiopia maybe 20 million out of Ethiopias 80 million people.
United Ethiopia, that is your wish since you were abused by the puppet turkish ottoman empire called ahmed gragn in the 16th century.
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