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Afghanistan starts to establish sharia banks

05 January 2011 11:59 (UTC +04:00)

Baku - APA-Economics. Afghanistan plans to let financial institutions expand services that comply with religious law and set up standalone Islamic banks to attract investment and an estimated $3 billion its residents havenâ€™t entrusted to banks, Bloomberg reported.
The countryâ€™s central bank, Da Afghanistan Bank, is drafting legislation to enable non-Islamic banks to convert into full-fledged Shariah-compliant lenders, Muhammad Qaseem Rahimi, director general of the Financial Supervision Department, said in a telephone interview Dec. 29. Seven of the nationâ€™s 17 financial institutions provide limited Islamic services such as loans and savings accounts, he said. The law will be submitted to parliament for approval in September.
Afghanistan, where 99 percent of its 29 million people are Muslims, is vying to expand Islamic financial services and lure international investors to help reduce the nationâ€™s reliance on overseas aid for reconstruction after more than three decades of war. Islamic banking will help attract â€œidleâ€ cash from Afghans, who refuse to use non-Shariah compliant institutions, the central bankâ€™s Rahimi said.
The new regulation will enable banks to offer more Shariah- compliant financial services such as debit cards and investment options through their windows, Rahimi said. The parliament needs to approve Islamic banking laws before the central bank issues licenses to start Shariah-compliant services, he said.
Afghanistanâ€™s government is limited to using short-term bills and international aid to finance development, according to the central bankâ€™s five-year plan to build its finance industry and reduce reliance on aid.