Lack of definitive regulations on Islamic banking in Libya stymies loan growth (By IFN)

Lack of definitive regulations on Islamic banking in Libya stymies loan growth

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LIBYA: Reforms in the Libyan banking industry to convert all banks into Shariah compliant entities by 2015 are said to have caused confusion within the banking industry and created uncertainty amongst consumers. The law – which was recently passed, would make Libya the third Middle Eastern country after Iran and Sudan to ban non-interest banking – was not given a clear timeframe. According to reports, the country’s parliament and central bank have also failed to respond to requests from banks with a definitive timeline and guidelines on how to transition into becoming Shariah compliant. As such, customers are bearing the brunt of the burden; as they are unable to take up loans from conventional banks and are left without any alternatives. Recent data has stipulated that loans and advances in one of Africa’s most oil rich countries climbed by 17% in the first nine months of 2012, while its loan-to-deposit ratio stood at 25% before the passing of the law. Unlike its North African neighbors Egypt and Tunisia, Libya has no immediate plans to issue Sukuk according to a central bank official. However, financial institutions from Bahrain and Qatar have expressed interest in expanding into the Libyan market, while Al Baraka Islamic Bank Bahrain has revealed plans to possibly purchase a conventional Libyan bank to be converted into a Shariah compliant bank.