Abdul Baasit Dikeni Hashiru is the writer of this article
The news that His Excellency John Dramani Mahama and the current administration are exploring the idea of Islamic banking is both timely and welcome. This article seeks to clarify a common misconception: Islamic banking is not exclusive to Muslims or Arabs—it is a financial system open to all.
Islamic banking is a form of ethical finance that prohibits the collection of interest (riba), avoids excessive uncertainty or risk (gharar), and restricts investments in socially harmful industries such as alcohol, gambling, and tobacco.
While every business venture inherently involves some level of risk, excessive risk-taking can lead to financial instability and ruin. In Ghana’s current economic environment, where it is difficult to recover after a business failure, reducing such risks is critical. This is where Islamic banking offers a compelling alternative.
Traditional banks and credit agencies attempt to minimize their exposure by demanding high collateral and multiple guarantors. However, despite these measures, loan default rates remain high. Islamic banking proposes a more collaborative approach, where risk is shared between the bank and the client.
One of the most prominent Islamic finance models is Mudarabah (profit-sharing). In this arrangement, the bank provides capital while the entrepreneur contributes expertise and management. Profits are shared based on a pre-agreed ratio, while losses are borne entirely by the capital provider—reducing the financial burden on the business owner.
Another key model is Musharakah, a partnership structure where multiple parties pool resources to fund a business project. Profits and losses are shared proportionally among the investors. There is also Ijara, a leasing arrangement in which the bank retains ownership of an asset (such as a car or equipment) while the client pays to use it. This allows individuals to operate businesses without needing to purchase expensive assets outright.
Beyond financial benefits, Islamic banking prioritizes social responsibility, equitable wealth distribution, and ethical investment. It is not only thriving in Muslim-majority countries but is also present in Western nations; for example, Habib Canadian Bank in Canada operates on Islamic finance principles.
Islamic banking is accessible to everyone—Muslims, Christians, and people of all faiths. Its ethical and risk-sharing models make it particularly friendly to entrepreneurs and small businesses. With the potential to foster inclusive growth and distribute wealth more equitably, Islamic banking could be a transformative tool for economic development across Africa.
The writer, Abdul Baasit Dikeni Hashiru, is a Microfinance Expert
