Amid the preparations of the Bank of Ghana to launch Islamic Banking products in the country, the Vice President of IMANI Africa, Bright Simons, is asking whether banks will willingly and easily adopt such a tightly regulated and restrictive business model if the potential customer base is limited.
The policy analyst has also raised concerns over the planned rebranding of Islamic banking as “non-interest banking,” which may reduce public tension, but it does not change the reality of how the system works.
Bright Simons explains that the model is firmly rooted in Islamic principles, and without those foundations, the concept loses its meaning.
Unlike conventional banking, Islamic banking avoids charging interest. Instead, banks and customers share profits and risks from real business activities. Depositors do not earn fixed interest; their returns depend on how well pooled investments perform.
Although this underlying principle may sound fair in theory, it comes with strict rules that significantly narrow investment choices.
Interest, known as riba, is only part of the restriction. Financial products that resemble gambling are also banned, and banks cannot invest in businesses considered unacceptable under Islamic law.
These include breweries, pig farms, and, in some interpretations, companies with high debt levels.
The core essence is to avoid charging interest (instead, banks “share profits and risks” in ventures/projects with customers. Customer deposits also don’t earn a fixed interest. Rather, customers get investment accounts into which their share of profits from pooled investments is paid. Except that interest (“Riba”) is not the only issue. Financial instruments that look too much like gambling are also prohibited, and banks can’t invest in anything frowned upon by Islam,” he noted.
Bright Simons adds that, in Ghana’s context, this principle could rule out investment products tied to many major companies, including breweries, banks, insurance firms, and even government treasury bills beyond minimal limits.
For observant Muslims, treasury bills are often not acceptable at all, further shrinking the available investment space.
These constraints, Bright Simons says, raise a practical business concern for banks. With so many mainstream investment options off the table, the question becomes whether the model can attract enough customers to remain profitable.
He further argues that banks would only pursue this system seriously if they are targeting customers whose religious beliefs strongly align with it. Although some non-Muslim investors are drawn to Islamic banking as an ethical or lower-risk option, he notes that this group is small.
“In Ghana’s context, financial products based on the stocks of companies like Accra Brewery, all the banks, most of the insurance companies, etc., would be off-limits. As would investment products based on treasury bills (more than 5%). In fact, treasury bills are disallowed for observant Muslims anyway,” the Vice President of IMANI Africa indicated.
He therefore questioned, “Given all these strict rules, why would any bank want such a business model if they weren’t targeting a large customer base whose Islamic faith draws them to the model? It is true that some secular investors are drawn to Islamic Banking as a low-risk alternative. But they are very few, and Islamic Banking isn’t automatically low-risk anyway.”
Surprisingly, he further revealed that in reality, Islamic banking is not risk-free, and depositors often face higher uncertainty since returns are not guaranteed.
These concerns from Bright Simons shift the conversation on Islamic Banking from mere diversification to business practicality.
The key concern here is whether the size and commitment of the potential customer base justify operating under such strict financial rules.
