Civil Society Team Calls on BoG to Suspend Normalisation of Non-Interest Banking

Introduction

The landscape of financial regulation in Ghana is currently facing a pivotal moment regarding the proposed introduction of non-interest banking. A prominent civil society coalition has formally urged the Bank of Ghana (BoG) to halt its plans to normalise non-interest banking operations within the country. This call to action follows the submission of a comprehensive memorandum on December 23, 2025, by Advocates for Christ Ghana and the Economy, Finance and Business Sustainability Gate. Their critique centers on the BoG’s draft “Guideline for the Regulation and Supervision of Non-Interest Banking,” which the group argues is premature and fraught with significant legal and operational risks.

At the heart of the civil society appeal is the assertion that the current draft guidelines contain material internal contradictions and technical gaps that could destabilise the financial sector. The organisations contend that the central bank has failed to develop a robust, context-specific model for Ghana’s unique legal and regulatory environment. Instead, they argue that the proposed framework attempts to import foreign jurisprudential and operational standards without necessary adaptation, potentially creating a parallel financial system that conflicts with constitutional principles of neutrality and equal treatment. This article provides a detailed analysis of the concerns raised, the specific defects identified in the draft guidelines, and the implications for the future of banking in Ghana.

Key Points

Background

The debate surrounding non-interest banking (often associated with Islamic banking) in Ghana has been ongoing for several years, driven by desires to foster financial inclusion and diversify the banking sector. The Bank of Ghana, as the primary regulator, has been working towards creating a legal framework that would allow for the operation of non-interest banking institutions alongside conventional banks. This effort culminated in the release of a draft “Guideline for the Regulation and Supervision of Non-Interest Banking,” which was open for public comment.

The specific document in question was the subject of a formal memorandum submitted on December 23, 2025. The submission was made by a coalition comprising “Advocates for Christ Ghana” and the “Economy, Finance and Business Sustainability Gate.” These entities act as public-interest advocacy groups focusing on the intersection of finance, law, and socio-economic sustainability. Their intervention was a direct response to the BoG’s invitation for stakeholder feedback on the draft guidelines.

The core of the background issue lies in the methodology proposed by the central bank. The civil society groups argue that rather than building a bespoke regulatory framework rooted in Ghana’s existing legal infrastructure (such as the Banks and Specialised Deposit-Taking Institutions Act, 2016), the BoG is attempting to “bolt on” external standards. These standards reportedly draw heavily from the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). While these are international bodies, the memorandum suggests that their direct application without significant local adaptation creates a “jurisprudential mismatch” with Ghanaian law.

Furthermore, the background context involves the proposed structural changes to the banking sector, specifically the “window system.” This operational model would permit existing conventional banks to open separate non-interest banking divisions. While this might seem like a low-barrier entry method to expand non-interest services, the civil society groups view it as a structural flaw that compromises the purity of the non-interest model and complicates regulatory oversight.

Analysis

The memorandum submitted to the Bank of Ghana offers a rigorous technical and legal analysis of the proposed guidelines. The analysis reveals that the draft is not merely in need of minor tweaks but suffers from “material internal contradictions.” A primary analytical point concerns the regulatory architecture. The proposed establishment of the Non-Interest Banking Advisory Committee (NIBAC) and the Non-Interest Finance Advisory Committee (NIFAC) is scrutinized closely. In the view of the civil society team, these bodies are not merely advisory; they possess “adjudicatory traits.” This implies they would have powers to resolve disputes or make binding decisions in ways that bypass or dilute the authority of the Bank of Ghana’s established supervisory mechanisms. Such a setup is analytically unsound because it fragments regulatory authority, leading to potential confusion over jurisdiction and enforcement.

Another critical area of analysis is constitutional adherence. The memorandum warns that creating a parallel financial system with distinct rules, dispute resolution mechanisms, and operational standards could violate the constitutional mandate of neutrality. If non-interest banks operate under a fundamentally different legal regime than conventional banks, it could be argued that they are not subject to “equal treatment before the law.” The analysis suggests that for a unified financial system to remain stable, all participants must ultimately be answerable to the same overarching legal and regulatory framework, specifically the laws of Ghana, rather than imported religious or customary jurisprudence that lacks codification in Ghanaian statute.

From a technical and operational perspective, the “window system” is analyzed as a recipe for regulatory arbitrage. The analysis posits that without “ring-fencing” requirements that are legally watertight, conventional banks could use non-interest windows to shift risks or transfer pricing in opaque ways. The memorandum highlights that the draft lacks detailed accounting and audit laws specific to non-interest transactions. Consequently, the analysis warns that without these safeguards, the “profit adequacy” rules—typically used in conventional banking to ensure capital buffers—cannot be correctly applied to non-interest banks, which do not deal in interest rates but in profit-sharing or fee-based models. Applying standard rules without a “prudential technology” adapted to non-interest mechanics is viewed as technically flawed.

Finally, the analysis questions the economic rationale. It is not enough to argue for financial inclusion; the regulator must demonstrate that the proposed regulatory cost is justified by market demand. The memorandum argues that the draft fails to provide evidence of sufficient demand to sustain a specialized regime. The analysis concludes that the risks of financial instability and regulatory confusion outweigh the unproven benefits, necessitating a withdrawal of the draft.

Practical Advice

For stakeholders, including financial institutions, legal experts, and policymakers, the following practical advice can be derived from the civil society memorandum’s critique. These points are essential for navigating the potential changes to Ghana’s banking regulations:

For Financial Institutions

1. Delay Strategic Investments: Banks currently considering the launch of non-interest banking windows should pause major capital investments. Given the call for withdrawal and comprehensive revision of the guidelines, the regulatory landscape remains unstable. Proceeding now risks non-compliance with future, stricter rules.

2. Review Internal Governance: If the “window system” is eventually adopted, institutions must prepare for strict “ring-fencing” requirements. Practical steps include setting up separate accounting systems, distinct management teams, and clear firewall policies to prevent regulatory arbitrage between conventional and non-interest operations.

3. Engage with Standard Setters: Financial institutions should actively engage with the Institute of Chartered Accountants, Ghana (ICAG), to understand how future accounting standards will be harmonized. The conflict between AAOIFI standards and local GAAP is a major pain point; proactive dialogue can mitigate future compliance costs.

For Regulators (Bank of Ghana)

1. Conduct a Gap Analysis: Before reissuing guidelines, the BoG should perform a detailed gap analysis comparing Ghanaian constitutional law and the Banks and Specialised Deposit-Taking Institutions Act against proposed AAOIFI/IFSB standards. Specific legal instruments must be amended to accommodate non-interest banking without creating a parallel legal system.

2. Develop Local Prudential Models: Rather than importing capital adequacy ratios directly, practical advice is to develop context-specific prudential metrics. This involves simulating the risk profiles of profit-sharing investment accounts versus interest-bearing deposits to ensure consumer protection is equivalent.

3. Clarify Dispute Resolution: The regulatory framework must explicitly state that all financial disputes, regardless of the banking model, fall under the jurisdiction of Ghanaian courts and the BoG’s established dispute resolution channels. Any proposed advisory committee (NIBAC/NIFAC) must be strictly advisory to avoid constitutional conflicts.

For Consumers and the Public

1. Understand the Risks: Consumers should be aware that the “window system” proposed by the BoG carries specific risks regarding the segregation of funds. Until robust legal safeguards are in place, there is a risk that consumer protections in non-interest windows may not be as strong as those in conventional banking.

2. Demand Transparency: If non-interest products are introduced, consumers should demand clear disclosure on how fees are calculated and how profits are shared, ensuring that the products are not merely conventional loans disguised as non-interest transactions (a practice known as “form over substance”).

FAQ

Conclusion

The call by Advocates for Christ Ghana and the Economy, Finance and Business Sustainability Gate represents a significant intervention in the regulation of Ghana’s financial sector. Their memorandum does not merely offer a critique but presents a detailed legal and technical roadmap arguing that the Bank of Ghana’s current approach to normalising non-interest banking is fundamentally flawed. The central thesis is that speed must yield to regulatory integrity. By highlighting the risks of constitutional conflict, regulatory fragmentation, and operational fragility, the civil society groups have placed the onus on the BoG to pause and rethink.

For the Bank of Ghana, the path forward involves a delicate balancing act. It must foster financial innovation and inclusion while maintaining a unified, stable, and legally sound regulatory environment. The withdrawal of the current draft guidelines, as requested by the memorandum, would allow for a more consultative process that builds a “Made in Ghana” framework rather than importing potentially incompatible external models. Ultimately, the goal expressed by the civil society team is not to block non-interest banking, but to ensure that when it arrives, it does so on a foundation of legal certainty, consumer protection, and financial stability.