By Mohammed AWAL ([email protected])
Professor John Gatsi, an economist and lecturer at the University of Cape Coast, has highlighted the significant role of Islamic banking in promoting diversity within the bond market.
He advocates a revision of banking sector regulations to incorporate the fundamental principles of Islamic banking which, he believes, will bolster market resilience and inclusivity through Sukuk issuance.
Prof. Gatsi proposes amendments to Act 930 or the introduction of additional legislation to integrate the core structures of Islamic banking. He also suggests amendments to Act 929, governing the capital market, to facilitate the trading of Islamic instruments such as Sukuk.
Unlike traditional bonds, Sukuk represents ownership stakes in assets rather than a simple debt instrument.
“Again, there should be an amendment to Act 1061 or enactment of an additional act to accommodate Takaful,” said Professor Gatsi, who is the Dean of the School of Business at the University of Cape Coast, during his inaugural address as a Professor of the University on the topic ‘Islamic banking options: exploring an inclusive alternative or complement’.
His insights shed light on the transformative impact Islamic finance can have on global financial systems, highlighting the need for greater recognition and adoption of its principles.
Professor Gatsi further argued that Islamic banking holds the key to addressing critical gaps in public infrastructure financing, offering a complementary avenue for funding, particularly within the framework of public-private partnerships (PPPs) and broader project finance initiatives.
“The underlying principles of Islamic finance support socially inclusive and development-promoting activities and have the potential to contribute to the achievement of the Sustainable Development Goals (SDGs),” he stated.
In 2023, a joint report published by the United Nations Development Programme (UNDP) and the Islamic Development Bank (IsDB) on innovations in Islamic inance indicated that Islamic finance offers to deepen financial inclusion, better risk-sharing, focus on financing real economic activities, work beyond the requirement of ESG, and contribute to the good of society.
The report further projected Islamic finance as a better option to financing SMEs and start-ups and achieving the Sustainable Development Goals.
Against this backdrop, Prof. Gatsi urged the Bank of Ghana to create the environment for the adoption of Islamic banking, saying: “The government should be interested in diversifying sources of infrastructure finance, deepen entrepreneurial supports, and adopt Islamic banking to contribute to meeting the SDGs”.
“Developing countries, including Ghana, have a young and growing population that will further exacerbate the difference between infrastructure needs and current infrastructure levels. To overcome this, Ghana needs to open the financial landscape for a complementary source of infrastructure finance,” he stated.
According to the World Bank, North Africa and sub-Saharan Africa have huge infrastructure deficits that require more than US$93billion annually.
