Faithful Finance: Unlocking Banking Islamization in Afghanistan
Abstract
:1. Introduction
2. Literature Review
2.1. State of the Financial Sector of Afghanistan
2.2. Islamic Banking in Afghanistan
- The vast majority of Afghans are followers of Islam and riba (interest) is considered amongst the gravest sins in Shari‘ah;
- The wave of Islamic financing will contribute to improved financial inclusion and trigger greater economic growth;
- The establishment of Islamic banking windows will launch a surge of deposits, providing depositors and/or borrowers a unique banking vehicle for intra- and extra-Afghanistan bank transfers (AACC 2020).
2.3. Challenges to Growth of Islamic Banking in Afghanistan
3. Methodology
4. Findings
4.1. State of the Legal System
4.2. Inadequate Provision of Banking Services
4.3. Islamic Nature of Islamic Banking
4.4. Insufficient Regulatory Capacity
4.5. Lack of Tailored Islamic Financial Products
4.6. The Madhhab Dilemma
5. Conclusions and Recommendations
Author Contributions
Funding
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
- Afghan-American Chamber of Commerce. 2020. Assisting Afghanistan’s Islamic/Sharia Banking Sector for Improved Economic Growth, Development, Trade & Investment. Washington, DC: AACC. [Google Scholar]
- Ahmad, Ziauddin. 1994. Islamic Banking: State of the Art. Islamic Economic Studies 2: 1–34. [Google Scholar]
- Al-Razni, Ahmad, Houssein Hassan Mohamed, Usama Mohammad, and Abdullah Ludeen. 2013. The Viability of Islamic Banks Under the Current Legal Framework of Afghanistan, Djibouti, Kuwait, and Sri Lanka. Available online: https://www.researchgate.net/publication/311844257_The_Viability_of_Islamic_Banks_Under_the_Current_Legal_Framework_of_Afghanistan_Djibouti_Kuwait_and_Sri_Lanka (accessed on 1 May 2023).
- Amiri, Mohammad Haroon. 2013. Growth and Future of Islamic Banking in Afghanistan. Unpublished thesis, Coventory University, Coventry, UK. [Google Scholar]
- ASA. 2022. Introduction of Research Center for Islamic Banking and Contemporary Issues. Available online: https://asa.gov.af/index.php/en/introduction-research-center-islamic-banking-and-contemporary-issues#:~:text=The%20Research%20Center%20for%20Islamic%20Banking%20and%20Contemporary,research%20on%20Islamic%20banking%20and%20contemporary%20financial%20issues (accessed on 1 May 2023).
- Aysan, Ahmet F., Mustafa Disli, Meryem Duygun, and Huseyin Ozturk. 2017. Islamic banks, deposit insurance reform, and market discipline: Evidence from a natural framework. Journal of Financial Services Research 51: 257–82. [Google Scholar] [CrossRef] [Green Version]
- Banking Law of Afghanistan. 2015. Official Gazette No. 1197. Available online: https://dab.gov.af/sites/default/files/2018-12/BankingLawofAfghanistanEnglishTranslation22762018113414921553325325_1.pdf (accessed on 25 March 2023).
- Chapra, Muhammad U. 1992. Islam and the Economic Challenge. Herndon: International Institute of Islamic Thought. [Google Scholar]
- Choudhury, Nafay. 2022. Order in the Bazaar: The Transformation of Non-state Law in Afghanistan’s Premier Money Exchange Market. Law & Social Inquiry 47: 292–330. [Google Scholar]
- Civil Code of Afghanistan. 1977. Official Gazette No. 353. Available online: http://www.asianlii.org/af/legis/laws/clotroacogn353p1977010513551015a650/ (accessed on 14 March 2023).
- Constitution of the Islamic Republic of Afghanistan. 2004. Official Gazette No. 818. Available online: https://www.diplomatie.gouv.fr/IMG/pdf/The_Constitution_of_the_Islamic_Republic_of_Afghanistan.pdf (accessed on 14 March 2023).
- Customs Act Law. 2016. Official Gazette No. 1235. Available online: https://kakaradvocates.com/uploads/laws/original-Customs%20Act%20-%20Dari-Pashto.pdf (accessed on 18 March 2023).
- The Da Afghanistan Bank Law. 2004. Official Gazette No. 819. Available online: https://dab.gov.af/sites/default/files/2018-12/DABLaw1English_2.pdf (accessed on 16 March 2023).
- Disli, Mustafa, Ahmet F. Aysan, and Omneya Abdelsalam. 2023. Favoring the Small and the Plenty: Islamic Banking for MSMEs. Economic Systems 47: 101051. [Google Scholar] [CrossRef]
- Halcomb, Elizabeth J., and Patricia M. Davidson. 2006. Is Verbatim Transcription of Interview Data Always Necessary? Applied Nursing Research 19: 38–42. [Google Scholar] [CrossRef]
- Hamdard, Alam Khan. 2011. Practical Aspects of Islamic Banking in Afghanistan. Available online: http://outlookafghanistan.net/topics.php?post_id=326 (accessed on 1 May 2023).
- Haqqani, Abdul Hakeem. 2022. Al-Imarat Al-Islamiyyah wa Nizamuha (Islamic Emirate and its System of Governance). Kabul: Maktabat Dar al-‘Uloom al-Shar‘ayyah. [Google Scholar]
- Hirschman, Albert. 1984. A Dissenter’s Confession: ‘The Strategy of Economic Development’ Revisited. Edited by Gerald M. Meier and Dudley Seers. (Org.). Pioneers in Development. London: Oxford University Press, pp. 87–111. [Google Scholar]
- IBA. 2020. Annual Audited Report. Kabul: IBA. [Google Scholar]
- IFSB. 2020. Islamic Financial Services Board Stability Report. Kuala Lumpur: IFSB. [Google Scholar]
- Islamic Emirate of Afghanistan. 2022a. Cabinet Decree No. 15. Available online: https://aop.gov.af/pa/get_cabinet_approvals/347/cabinet_approvals/1402 (accessed on 4 April 2023).
- Islamic Emirate of Afghanistan. 2022b. Cabinet Decree No. 28. Available online: https://aop.gov.af/pa/get_cabinet_approvals/347/cabinet_approvals/1401 (accessed on 21 March 2023).
- Khaama Press. 2012. Only 4% Afghans Have Proper Access to Banking System. Available online: https://www.khaama.com/only-4-afghans-have-proper-access-to-banking-system-799/ (accessed on 1 May 2023).
- Khan, Zia. 2021. Afghanistan Banks Risk Losing Years of Gains after Regime Change. Available online: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/afghanistan-banks-risk-losing-years-of-gains-after-regime-change-66778624 (accessed on 1 May 2023).
- Khazan, Olga. 2013. Sharia, the American Withdrawal, and Other Reasons Few Afghans Use Banks. Available online: https://www.theatlantic.com/international/archive/2013/03/sharia-the-american-withdrawal-and-other-reasons-few-afghans-use-banks/273953/ (accessed on 1 May 2023).
- Law on Income Tax. 2009. Official Gazette No. 976. Available online: https://momp.gov.af/sites/default/files/2019-03/Income_Tax_Law.pdf (accessed on 2 April 2023).
- Law on Tax Administration. 2015. Official Gazette No. 1198. Available online: https://kakaradvocates.com/uploads/laws/translation-Tax%20Administration%20Law%20-%20En.pdf (accessed on 25 March 2023).
- Limited Liability Company Law. 2018. Official Gazette No. 1292. Available online: https://law.acku.edu.af/law-on-limited-liability-companies/ (accessed on 18 March 2023).
- McLeod, Grant. 2016. Responding to Corruption and the Kabul Bank Collapse. Available online: https://www.usip.org/sites/default/files/SR398-Responding-to-Corruption-and-the-Kabul-Bank-Collapse.pdf#:~:text=In%20September%202010%2C%20Kabul%20Bank%2C%20a%20systemic%20bank,conservatorship.1The%20crisis%20severely%20stressed%20the%20Afghan%20financial%20system (accessed on 1 May 2023).
- Minichiello, Victor. 1990. In-Depth Interviewing: Researching People. London: Longman Cheshire. [Google Scholar]
- Naimi, M. Ibrahim. 2017. A Review of the Recent Literature on Islamic Banking and Finance. Journal of Economic and Financial Studies 5: 20–35. [Google Scholar]
- Naseri, Khatera, and Ashurov Sharofiddin. 2020. Exploring the Challenges of the Historical Development of Islamic Banking System in Afghanistan Using Document Analysis. Journal of Islamic Finance 9: 13–25. [Google Scholar]
- Nyazee, Imran Ahsan Khan. 1996. Theories of Islamic Law: The Methodology of Ijtihad. Delhi: Adam Publishers and Distributors. [Google Scholar]
- Nyazee, Imran Ahsan Khan. 2012. Islamic Banking is Ḥaram. Available online: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2407039 (accessed on 1 May 2023).
- Nyazee, Imran Ahsan Khan. 2016. Following a Single School and Rules for Issuing Fatwas. Rawalpindi: Advanced Legal Studies Institute (ALSI). [Google Scholar]
- Omar, Zabihullah, and Vikas Tyagi. 2021. A review on Analysis of the flow of Islamic banking and economic growth in Afghanistan. International Research Journal of Engineering and Technology (IRJET) 8: 709–13. [Google Scholar]
- Patton, Michael Quinn. 2014. Qualitative Research & Evaluation Methods: Integrating Theory and Practice. Thousand Oaks: Sage Publications. [Google Scholar]
- Rafay, Abdul, Ramla Sadiq, and Muhammad Ajmal. 2016. Fragmentation of Islamic Financial Products—An Exploratory Study of Islamic Schools of Thought. Abasyn Journal of Social Sciences, Special Issue: Towards Financial Inclusion, 48–61. [Google Scholar]
- Ross, R. 2020. Challenges and opportunities for Islamic finance in the twenty-first century. Finance Research Letters, 36. [Google Scholar]
- Rostan, Pierre, Sayed Alami, Ellaha Mohammad, Abobaker Rahmani, and Sughra Azizi. 2021. Challenges of Islamic Banking in Least Developed countries: The case of Afghanistan. JOEEP: Journal of Emerging Economies and Policy 6: 5–19. [Google Scholar]
- Safi, Lina, Boris Abbey, Nadia Ben Sedrine Goucha, Omar Al Serhan, and Kimberley Gleason. 2020. Knowledge of Islamic Banking and Bank Customer Satisfaction in Afghanistan: An Exploratory Analysis. International Journal of Business Performance Management 21: 21–38. [Google Scholar] [CrossRef]
- Salh, Shamsalden Aziz. 2019. Islamic Windows of the Conventional Banks: Challenges and Solutions. Paper present at the 4th International Legal Issues Conference-ILIC2019, Erbil, Iraq, April 30; ISBN 978-9922-9036-2-0. [Google Scholar] [CrossRef]
- Salim, Mohammad Salim, and Abdul Qoyum. 2021. Factors Delaying the Establishment of the Islamic Banking System in Afghanistan. International Journal of Advanced Academic Studies 3: 412–18. [Google Scholar] [CrossRef]
- Statista. 2023. Total Value of Islamic Finance Assets Worldwide from 2012 to 2021 with a Projection for 2026. Available online: https://www.statista.com/statistics/1090815/worldwide-value-of-islamic-finance-assets/ (accessed on 1 May 2023).
- Syahmi, Muhammad Izzul, Mohammad Taqiuddin Mohamad, and Mohd Anuar Ramli. 2022. Experts’ Views on Hiyal in Malaysian Islamic Banks: The Case of Tawarruq-Based Deposit Products. ISRA International Journal of Islamic Finance 14: 289–302. [Google Scholar] [CrossRef]
- Syed, Ehsanullah Agha, and Mustafa Omar. 2017. Hiyal in Islamic Finance: A Recognition of Genuine Economic Need or Circumvention of Riba? Qualitative Research in Financial Markets 9: 382–90. [Google Scholar] [CrossRef]
- The DAB. 2019. Islamic Banking Regulations. Available online: https://dab.gov.af/Islamic-Banking-Regulations (accessed on 1 May 2023).
- Transparency International. 2022. Corruption Perception Index. Available online: https://www.transparency.org/en/cpi/2022 (accessed on 1 May 2023).
- UNDP. 2021. Policy Brief: The Afghan Banking and Financial System Situation Report. Available online: https://www.undp.org/afghanistan/publications/policy-brief-afghan-banking-and-financial-system-situation-report (accessed on 1 May 2023).
- Urdu Web. 2008. اسلامی بنکاری کے خلاف اسلام ہونے کے بارے میں علماء کے موقف کا خلاصہ | اردو محفل فورم. Available online: https://www.urduweb.org/mehfil/threads/%d8%a7%d8%b3%d9%84%d8%a7%d9%85%db%8c-%d8%a8%d9%86%da%a9%d8%a7%d8%b1%db%8c-%da%a9%db%92-%d8%ae%d9%84%d8%a7%d9%81-%d8%a7%d8%b3%d9%84%d8%a7%d9%85-%db%81%d9%88%d9%86%db%92-%da%a9%db%92-%d8%a8%d8%a7%d8%b1%db%92-%d9%85%db%8c%da%ba-%d8%b9%d9%84%d9%85%d8%a7%d8%a1-%da%a9%db%92-%d9%85%d9%88%d9%82%d9%81-%da%a9%d8%a7-%d8%ae%d9%84%d8%a7%d8%b5%db%81.15207/ (accessed on 1 May 2023).
- Vizcaino, Bernardo. 2018. Islamic Finance in Afghanistan Growing, Investment Options Limited–Report. Reuters, December 3. Available online: https://www.reuters.com/article/islamicfinance-afghanistan-idUSL8N1Y80KM (accessed on 1 May 2023).
- World Bank. 2022. Afghanistan Development Update. Available online: https://thedocs.worldbank.org/en/doc/5f01165822f3639224e0d483ba1861fc-0310062022/ (accessed on 1 May 2023).
- Zhang, Yan, and Barbara M. Wildemuth. 2009. Unstructured interviews. In Applications of Social Research Methods to Questions in Information and Library Science. Exeter: Libraries Unlimited, pp. 222–31. [Google Scholar]
Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content. |
© 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
Share and Cite
Disli, M.; Hatam, A.K.; Jalaly, S. Faithful Finance: Unlocking Banking Islamization in Afghanistan. Economies 2023, 11, 189. https://doi.org/10.3390/economies11070189
Disli M, Hatam AK, Jalaly S. Faithful Finance: Unlocking Banking Islamization in Afghanistan. Economies. 2023; 11(7):189. https://doi.org/10.3390/economies11070189
Chicago/Turabian StyleDisli, Mustafa, Ahmad Khalid Hatam, and Shakir Jalaly. 2023. "Faithful Finance: Unlocking Banking Islamization in Afghanistan" Economies 11, no. 7: 189. https://doi.org/10.3390/economies11070189
APA StyleDisli, M., Hatam, A. K., & Jalaly, S. (2023). Faithful Finance: Unlocking Banking Islamization in Afghanistan. Economies, 11(7), 189. https://doi.org/10.3390/economies11070189