By Norman Adu BAMFO
The introduction of Islamic banking under Ghana’s Non-Interest Banking (NIB) framework marks a transformative milestone for the country’s financial system. It is not merely about providing faith-based products, but about embedding an alternative model of finance that emphasizes fairness, transparency, and risk-sharing.
For treasury managers, this development reshapes liquidity structures, balance sheet dynamics, and hedging strategies. For the wider banking sector, it promises heightened competition, innovation, and access to new sources of international capital.
This policy brief examines the strategic implications of Islamic banking for Ghana, highlighting both the challenges and opportunities it brings for regulators, banks, and investors.
Context and rationale
In recent years, Ghana’s financial sector has experienced deep reforms ranging from recapitalization of banks to the expansion of digital services and tighter regulatory oversight. Yet significant challenges remain, including limited financial inclusion, persistently high borrowing costs, and an overreliance on conventional interest-based instruments.
The Non-Interest Banking framework introduced by the Bank of Ghana provides a new foundation to address these gaps by diversifying financial offerings, attracting foreign direct investment from Islamic markets, and strengthening systemic stability through the adoption of risk-sharing mechanisms.
Implications for treasury management
For treasury management, the introduction of Islamic banking changes the very structure of balance sheet management. Conventional interest-bearing deposits are replaced by profit-sharing investment accounts such as mudarabah, compelling treasurers to rethink liability modelling and prepare for variability in returns rather than fixed obligations.
Liquidity management also becomes more complex, given the scarcity of Sharia-compliant government securities. Without an active sukuk market, Islamic banks face difficulties in meeting regulatory liquidity coverage requirements, although the development of a sovereign sukuk program could transform this challenge into an opportunity by providing high-quality liquid assets and establishing a Sharia-compliant yield curve.
Risk management practices equally require adaptation. Conventional derivatives often conflict with Sharia principles, limiting the use of widely deployed interest rate swaps or forward contracts.
Treasurers will instead need to rely on Sharia-compliant alternatives such as wa’ad-based FX contracts and commodity murabaha structures to hedge currency and market risks. Moreover, the Bank of Ghana will need to provide Sharia-compliant liquidity windows to ensure that Islamic banks are not disadvantaged in times of stress, thereby guaranteeing a level playing field across the financial sector.
Sector-wide dynamics
The effects of Islamic banking are not confined to treasury operations. At the systemic level, non-interest finance could accelerate financial inclusion by offering alternatives to segments of the population and SMEs that are reluctant to engage with conventional banks due to interest-based products.
For the banking industry, the entry of Islamic banking will inevitably drive competition, with conventional banks likely to launch Islamic windows or ethical finance products of their own. This competition, if well managed, could spur innovation and improve product diversity.
The strategic implications extend beyond Ghana’s borders. With a credible Islamic finance framework, the country could attract investment flows from the Middle East and Southeast Asia, leveraging sukuk issuance and Sharia-compliant funds to finance infrastructure at lower costs. Regulatory credibility is therefore essential.
The Non-Interest Banking framework already provides a rulebook for licensing, Sharia governance, and disclosure standards, but its implementation will be critical in establishing investor trust. A further challenge lies in capacity building: treasury, legal, and risk professionals will require training in Islamic financial structures, while the establishment of Sharia supervisory boards will be vital for credibility and compliance.
Strategic outlook
Islamic banking and non-interest finance represent more than a niche innovation; they are strategic levers for Ghana’s financial transformation. For treasurers, this shift requires new tools, models, and mindsets. For the broader sector, it promises deeper financial inclusion, more diversified capital inflows, and heightened competition.
If complemented by regulatory innovation, sovereign sukuk issuance, and capacity building, Islamic banking under the NIB framework has the potential to become a cornerstone of Ghana’s financial future. Properly nurtured, it can anchor systemic stability, broaden participation in the financial system, and position Ghana as a regional hub for ethical and inclusive finance in West Africa.
>>>the writer is a seasoned professional in risk, finance, banking, and treasury management with over a decade of academic and industry experience. He serves as a Part-time Lecturer at the University of Ghana Graduate Business School and Instructor at the National Banking College. His dual engagement in academia and industry enables him to bridge theory and practice, advancing financial market knowledge, innovation, and governance across Ghana’s banking sector. He can be reached via [email protected] and or +233240402075
