[LINK] "Senegal, Pakistan in Banking Push: Islamic Finance"
Canny idea, this. Certainly economically underdeveloped countries could use as much domestically-raised capital as they could raise. If the theory works, of course.
Senegal, Pakistan and Afghanistan, among the world’s 50 poorest nations, are turning to Islamic banking to spur economic growth by encouraging people to take out loans and open savings accounts.
Outstanding domestic bank lending accounted for 3.5 percent of Afghanistan’s gross domestic product in 2008, 25 percent in Senegal, 27 percent in Nigeria and 46 percent in Pakistan, according to data compiled by the World Bank. The rates compare with 224 percent in the U.S. and 115 percent in Malaysia, a global hub for finance that conforms with Shariah principles.
Developing Islamic nations have shunned banking in part because of the religion’s ban on interest, limiting access to funds for project financing and stunting business growth, according to the International Monetary Fund. Governments should improve regulations, products and institutions that comply with Shariah law to accelerate the industry’s development, Patrick Imam and Kangni Kpodar, economists at the IMF, said in a telephone interview from Washington on Sept. 14.
“Islamic banks provide access to finance to a segment of the population that is underbanked,” said Imam. Once “they start putting money in these banks you start a process of financial intermediation, where savings are channeled from individuals via Islamic banks to investments,” he said.
[. . .]
The concept of risk-sharing in Shariah banking that prohibits interest payments would be more useful in Muslim countries because their economies are less diversified, the IMF economists said.
“In the Islamic banking system, both the bank and entrepreneur share the reward and failure, and in many developing countries such risk sharing might allow entrepreneurs to undertake projects that they couldn’t otherwise contemplate,” said Kpodar at the IMF.
Senegal, Pakistan and Afghanistan, among the world’s 50 poorest nations, are turning to Islamic banking to spur economic growth by encouraging people to take out loans and open savings accounts.
Outstanding domestic bank lending accounted for 3.5 percent of Afghanistan’s gross domestic product in 2008, 25 percent in Senegal, 27 percent in Nigeria and 46 percent in Pakistan, according to data compiled by the World Bank. The rates compare with 224 percent in the U.S. and 115 percent in Malaysia, a global hub for finance that conforms with Shariah principles.
Developing Islamic nations have shunned banking in part because of the religion’s ban on interest, limiting access to funds for project financing and stunting business growth, according to the International Monetary Fund. Governments should improve regulations, products and institutions that comply with Shariah law to accelerate the industry’s development, Patrick Imam and Kangni Kpodar, economists at the IMF, said in a telephone interview from Washington on Sept. 14.
“Islamic banks provide access to finance to a segment of the population that is underbanked,” said Imam. Once “they start putting money in these banks you start a process of financial intermediation, where savings are channeled from individuals via Islamic banks to investments,” he said.
[. . .]
The concept of risk-sharing in Shariah banking that prohibits interest payments would be more useful in Muslim countries because their economies are less diversified, the IMF economists said.
“In the Islamic banking system, both the bank and entrepreneur share the reward and failure, and in many developing countries such risk sharing might allow entrepreneurs to undertake projects that they couldn’t otherwise contemplate,” said Kpodar at the IMF.