Introduction

The Bank of Ghana’s recent “Exposure Draft” on the regulation and supervision of Non-Interest Banking (NIB) has sparked significant debate. The central bank’s decision to rebrand “Islamic Banking” as “Non-Interest Banking” aims to avoid controversy but introduces a host of technical and regulatory challenges. This article delves into the intricacies of this rebranding, examining its implications for Ghana’s financial sector.

Key Points

Background

The Evolution of Banking Regulation in Ghana

The Exposure Draft of December 9, 2025, comes nearly a decade after the passage of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). This act was designed to provide a comprehensive framework for risk management across the banking sector, rooted in the concept of intermediation—taking deposits and lending funds for interest.

The Introduction of Non-Interest Banking

The draft guideline aims to meet the growing demand for Non-Interest Banking products and services. However, the rebranding from “Islamic Banking” to “Non-Interest Banking” introduces a parallel regime that must coexist with the existing interest-based banking system.

Analysis

Regulatory and Legal Conflicts

The Bank of Ghana’s guideline mandates adherence to the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards, which are inherently religious. This creates a fundamental contradiction: the regulator insists the system is “Non-Interest” while legally binding it to Islamic standards.

Governance and Compliance

The proposed governance structure includes the Non-Interest Banking Advisory Committee (NIBAC) and the Non-Interest Financial Advisory Council (NIFAC). This bifurcated model risks conflicts between secular prudential norms and religious requirements.

Tax and Financial Implications

The rebranding raises significant tax and financial questions. For instance, the treatment of “interest” versus “profit” in tax deductions and the potential for double-taxation in Murabahah transactions are critical issues that need resolution.

Practical Advice

Navigating the Regulatory Landscape

Financial institutions looking to offer Non-Interest Banking products must carefully navigate the regulatory landscape. This includes understanding the implications of AAOIFI standards, ensuring compliance with local laws, and managing the risks associated with the dual governance structure.

Addressing Tax and Legal Challenges

Institutions should work closely with tax advisors and legal experts to address the complexities of tax treatment and legal interpretations. This includes seeking clarifications on the treatment of “interest” and “profit” and ensuring compliance with both secular and religious norms.

Frequently Asked Questions

What is Non-Interest Banking?

Non-Interest Banking (NIB) is a financial system that operates without charging or paying interest, adhering to principles that prohibit the payment or receipt of interest. It is often associated with Islamic banking but is presented in a secular context.

How Does Non-Interest Banking Differ from Islamic Banking?

While Non-Interest Banking and Islamic Banking share similar principles, the key difference lies in the branding and regulatory framework. Non-Interest Banking aims to secularize the concept, avoiding religious connotations, while Islamic Banking is explicitly based on Islamic principles.

What Are the Key Challenges of Non-Interest Banking?

The key challenges include regulatory conflicts, tax implications, legal interpretations, and the governance structure. These challenges arise from the need to balance secular and religious norms and ensure compliance with existing financial laws.

Conclusion

The Bank of Ghana’s rebranding of Islamic Banking to Non-Interest Banking is a complex and multifaceted issue. While the intention to avoid controversy is understandable, the approach introduces significant regulatory, legal, and practical challenges. Addressing these challenges requires a comprehensive and nuanced understanding of both secular and religious financial principles, as well as a commitment to clear and consistent regulatory frameworks.