Bright Simons, Vice President of policy think tank IMANI Africa, has expressed strong reservations about the Bank of Ghana’s draft guidelines for regulating what it describes as “Non-Interest Banking,” cautioning that the framework could expose the sector to legal uncertainty, regulatory weaknesses, and operational challenges.
In an article published on Saturday, December 13, reacting to the central bank’s exposure draft, Mr Simons argued that the attempt to rebrand Islamic Banking as Non-Interest Banking may do more harm than good.
While the rebranding may be aimed at avoiding religious sensitivities, he said it fails to acknowledge that the model is fundamentally based on Islamic financial principles.
He noted that despite prohibitions on religious symbols and terminology in the draft guidelines, banks are still required to comply with Islamic financial standards set by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).
According to him, this inconsistency creates confusion for financial institutions, customers, regulators, and the judiciary, particularly in the absence of a specific Islamic Banking law within Ghana’s secular legal framework.
Mr Simons further warned that legal disputes arising from Islamic finance instruments such as profit-sharing and partnership contracts could be difficult for Ghanaian courts to adjudicate, since such arrangements are grounded in Islamic jurisprudence rather than Ghana’s statutory or common law traditions.
The IMANI Africa Vice President also criticised the proposed “window” system, which permits conventional banks to offer non-interest products alongside traditional interest-based services.
He cautioned that this model could be exploited, allowing banks to benefit from regulatory or tax incentives without fully adhering to the risk-sharing principles central to non-interest banking.
Additionally, he raised concerns about unresolved issues relating to taxation, deposit insurance, liquidity management, and capital adequacy, arguing that the draft guidelines do not clearly explain how non-interest banks would compete fairly within Ghana’s existing financial and tax structures.
He also questioned provisions that prevent non-interest banks from applying late-payment penalties, warning that this could undermine repayment discipline and expose such institutions to financial risk.
In conclusion, Mr Simons warned that the proposed framework could result in a non-interest banking system that appears well-designed on paper but proves difficult to sustain in practice.
He urged the Bank of Ghana to be transparent about introducing Islamic Banking, backed by clear legislation on taxation, bonds, liquidity support, and dispute resolution.
Without such reforms, he cautioned, Ghana’s non-interest banking regime may struggle to attract both investors and customers.
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