Islamic finance: Libya’s banks struggle with new Shariah rules
State Islamizes banking sector; Potential impact on global sukuk market
Muftah Omar Muftah is animated and optimistic as he talks about the future. "The new system is going to transform the entire economy," enthuses the chairman of Yaqeen Bank, one of three brand-new Islamic banks due to open in Libya in the next eight months. "Islamic banking is about partnership. It will nurture small enterprises, it will create new jobs and develop skills. It will help Libya become a country that can survive without oil."
The three new lenders are part of a banking revolution that started eight months ago and, as with many of the recent uprisings in the Arab world, although the revolutionaries are passionate and the ideas are popular, the execution is proving problematic.
Libya’s newly founded General National Congress passed an Islamic banking law on January 6 this year. It introduced an immediate ban on the levying of interest on retail customers, and set a 2015 deadline for the entire financial system to become Shariah-compliant.
The law has put the country in a singular situation. The only other country that has a financial system that is fully compliant with Sunni Islam is Sudan, and no country has ever managed to fully Islamize its financial system in such a short amount of time.