Zimbabwe to introduce Islamic banking

Islamic group Orischart says it is in negotiations with monetary authorities in Zimbabwe to introduce Islamic banking in the country.

Ashirai Mawere, an Orischart official, told businessdaily that they had engaged the central bank and Finance ministry.

"We so much want to boost this nation's economy through Islamic funds.

"The issue to do with liquidity is affecting this economy too much.

Government expenditure is taking 70 percent of Treasury's budget," he said.

Mawere said Islamic banking will among other things help ease liquidity challenges in the country and boost Zimbabwe's status in the world of financial services.

Islamic banking is based on the principles of Islamic law (shariah) and guided by Islamic economies.

Two basic principles behind such a banking system are the sharing of profit and loss and significantly; it prohibits the collection of interest, which is not permitted under Islamic law.

Mawere - who is part of the group that is organising Zimbabwe's first ever Islamic Expo to be held from November 6th to 10th, 2013 - said the country needs practical solutions to carry it forward.

"As part of this Expo we are confident of our ability to assist distressed business, government and entrepreneurs through our Shariah Advisory Board," he said.

This comes as international Islamic finance sector is expected to be worth $2,6 trillion by 2017.

Mawere noted that the Islamic banking system does not have any religious connotation and will be open to all irrespective of religion and caste.

"Muslims have a traceable record in the development of health and general science, education, sports, literature and economics and we need to participate in all this success," he said.

Market experts believe that in order to tap the immense investment potential of the oil-rich Middle East, it was in Zimbabwe's interest to introduce Islamic banking.

"It will provide the opportunity to bring a large section of the Muslim population into the mainstream. It is a sophisticated banking and finance structure based on moral and social values and is compatible with modern-day financing needs," said an equities market analyst with a local bank.

More than 50 countries, including the United State of America, the United Kingdom, France, Japan, Singapore, Saudi Arabia, Germany, China and Malaysia have recognised Islamic banking and finance. And major international corporate banks such as Citigroup, HSBC, Deutsche Bank and Standard Chartered have Islamic banking windows.

Incidentally, in many countries, 30 to 40 percent of investors in this banking system are non-Muslim.

Research has shown that while the world faced a severe economic crisis in the past few months, Islamic banks continued to grow unabated.

And this industry is growing at about 20 percent to 30 percent annually.

"Since the core principle of the system is sharing in both profit and loss, it would reduce the impact of the financial slowdown in Western countries.

"And if Zimbabwe were to introduce the system, the concept was likely to boost the economy of the country as well as the entire southern African region," said Innocent Mugore an independent economist.

Comment could not be obtained from the Reserve Bank of Zimbabwe nor Finance minister Patrick Chinamasa.