In the Memories of Talibaans : Introduction of Islamic Banking in Afghanistan

If we remember the past few decades we can easily remind the sharia imposed by the Talibaans in Afghanistan which is anyhow still in charge in some parts of Afghanistan. President Obama have indicated to leave Afghanistan and meanwhile DAB's (Da Afghanistan Bank) spokeman Aimal Hashoor announced the Afghanistan plans to issue licenses for three Islamic Banks to offer the services comply with the majority of the population's religion.

The Three banks who are seeking to work in Afghanistan are Afghan United Bank, Ghazanfar Bank and Maiwand Bank. CEO of Afghan United Bank Sayed Mahmood ul Hasssan said the products are limited to Islamic Loans.
Government took this decision because it want to expand the Islamic Finance to draw more assets in economy to reduce the nations dependence on the foreign aid and as being the extremist Muslim society the Afghan's will not tend to use the conventional banking. Afghanistan have received nearly $32 billions in terms of international aid since the U.S attack on Afghanistan in 2001.

According to US department of State the economic growth rate is on average 11.3% p.a since 2004 .
Senior executive vice president of Al Baraka Islamic Kaleem Iqbal said  in Islamabad

“Islamic banks can fill the vacuum as conventional banking is not fully developed in Afghanistan, the government would be looking forward to participation by banks in its plans to sell sukuk.”

Sukuk Plan
Afghanistan’s government is limited to using short-term bills and international aid to finance development.  Rahimullah Zaker the general director of the market operation’s department said DAB has about 12 billion Afghanis ($261 million) of bills due in 12 months or less outstanding.

Global sales of sukuk fell 25 percent to $8.3 billion so far this year, Issuance totaled $20.2 billion last year, up from $14.1 billion in 2008, and reached a record $31 billion in 2007. The debt is based on asset returns rather than interest to meet Shariah guidelines.

Debt Returns

The difference between average yields on Islamic bonds and the LIBOR narrowed four basis points, or 0.04 percentage point, to 381 yesterday, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index.

Shariah-compliant bonds returned 10 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, while debt in developing markets gained 13 percent, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.

Malaysia’s 3.928 percent Islamic note yields due June 2015 fell three basis points to a record-low 2.73 percent today, according to prices from Royal Bank of Scotland Group Plc.

Afghanistan, with a population of 29 million, is the poorest country in the Asia-Pacific region, with 42 percent of people living on less than $1.25 a day, according to a report on the Manila-based Asian Development Bank’s website.

Good Growth

The government announced a five-year plan to build its finance industry and reduce reliance on aid in 2009. President Barack Obama told Afghan President Hamid Karzai on Aug. 13 that the U.S. is committed to helping Afghanistan become a “stable, secure and prosperous” nation.

The parliament needs to approve Islamic banking laws before the central bank issues licenses to start Shariah-compliant services, Hashoor said. Afghan United plans to offer Islamic credit cards instead once the bank gets approval to offer full- fledged Islamic services.

Hassan said.

“We will have good growth of Islamic banking in the future as this is where Muslims prefer to invest their money,”

Rama Raju, president of Maiwand Bank, the first lender to provide Islamic loans in Afghanistan, said in an Aug. 15 interview from Kabul. 

“We are looking forward to the sukuk auction.”

Courtesy: Bloomberg