Interest free finance, economy summit kicks off

Organized by Halal Promotion PLC, Interest-Free Finance and Economy Summit has been kicked off Thursday at Sheraton Addis Hotel.

Ahmed Shide, Minister of Finance, Solomon Desta, Vice Governor of the National Bank of Ethiopia (NBE) for Financial Institutions Supervision, Mohammed Endris (PhD), Director General of Ethiopian Diaspora Service (EDS), Ambassador Birtukan Ayano, State Minister of Foreign Affairs and Sheikh Haji Ibrahim Tufa, President of the Ethiopian Islamic Affairs Supreme Council attended the opening program.

Kenya, Sudan and United Kingdom (UK) are the best known countries for their wide-coverage of interest free banking (IFB) services. Ethiopia’s interest free banking has been expanding—117.2 billion Birr has been deposited through interest free banking (IFB) as of June 2020, according to NBE.

Meanwhile, 35.5 billion Birr loan has been disbursed through IFB services across the country. Also, 12 million number of IFB service accounts have been opened in six years.

Ahmed Shide, who is also Chair of the National Finance Inclusion Committee, said that IFB service will have a mammoth contribution to both financial sector and economic growth.

Mohammed, who is in charge of EDS explained that the Diaspora has its own role in expanding IFB services.

Strengthening IFB industry’s and regulator’s (NBE) execution capacity and implementing financial technologies are the recommendations suggested by Solomon to improve IFB services.

The NBE has issued the long-awaited directive on the formation of full-fledged IFB in 2019.

Shortage of skilled Islamic banking experts and inadequate awareness about Islamic finance products are the challenges of IFB practices in Ethiopia, according to Elham Abubeker, Representative of Takaful Services at Global Insurance Company.

Islamic finance, aka interest-free finance (IFF), derives and defends its existence through Shari’ah compliance. Broadly, IFF is a type of financing activity that must comply with Islamic Law. The concept can also refer to the investments that are permissible under Shari’ah.

Yigermal Meshesha, Marketing and Business Development Manager of Kacha Digital Financial Service S.C. presented that the 65% unbanked population in Ethiopia is an opportunity to expand IFB and digital banking services.

He raised that inequitable distribution of funds and unbalanced geographical concentration of bank branches and credit facilities as challenges.

Yigermal said that Kacha Digital Financial Service S.C. is discussing with various actors including banks to launch Shari’ah compliance IFB services.