Kabul: Afghanistan's central bank is planning to implement an "Islamic banking system", a spokesman said.
Sabir Momand, the spokesman of Da Afghanistan Bank (DAB), however did not elaborate on the details of the new system, reports TOLO News.
"The implementation of the Islamic banking system will be a long process and it is being enforced in many foreign countries. It will come into effect gradually in Afghanistan as well," he said.
The conventional bank finds a credit worthy customer and lends at interest and compound interest. The bank is not particularly concerned about what happens to this money other than that it gets repaid.
Islamic banking is non-interest based. Here, Islamic bank invests in actual assets and services. It might buy machinery, lease out a car, or invest in a small business. But, throughout, the transaction is always tied to a real asset or service.
The system is working successfully not only in Islamic countries but also in UK, US and a number of non-Muslim states. In terms of net worth, assets of Islamic Banking Industry (IBI) grew by Rs 693 billion (14.2 percent) during the quarter October to December 2021 and crossed five-trillion mark to reach Rs 5,577 billion by end December 2021.
After the Taliban came to power last August, the Afghan banking system faced severe crisis in part caused by Illegitimate sanctions that restricted the transfer of funds abroad, and more importantly because the United States refused to defreeze Afghanistan wealth despite promising it in Doha deal.
Despite these challenges, the Taliban government is however slowly bringing the economy on track using the resources available in hand.
However, those opposed to non-interest based system have already started opposing the announcement made by Afghanistan saying that changes in the banking system will create "hurdles" in operations.
"Before an evaluation of the banking system and markets, the implementing of an Islamic banking system will affect the economy," TOLO News quoted Seyar Masoud, a so-called economist, as saying.
"The change of (the current banking system) into an Islamic banking system could create problems because many of the banks are using the current banking system."
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