AFGHANISTAN: After years of navigating regulatory hurdles and persisting security concerns, Afghanistan is finally opening its doors to its first fully-fledged Islamic bank, a welcome development in the 35 million-strong Islamic Republic.
IFN can confirm that conventional lender Bakhtar Bank has received the regulatory nod from the central bank, Da Afghanistan Bank, to operate in full compliance with Shariah principles in order to offer a full suite of Shariah compliant products to its largely unbanked Muslim population. To be known as the Islamic Bank of Afghanistan, the bank, which has US$194.34 million in assets as at the end of June 2017, will begin servicing a select number of customers on the 1st April with a view of catering to the Afghan public from the 19th April onward when it officially launches.
“Ninety one percent of Afghanistan is unbanked economy, with limited access to finance. We intend to help change that by introducing faith-sensitive, ie Islamic, banking,” Amer Khalil Ur Rehman, CEO and president of Bakhtar Bank, told IFN.
The landlocked nation has been wrestling with slow economic recovery amid worsening security conditions as civilian casualties and conflict-induced displacement reach an all-time high. Islamic finance progress has largely stalled due to the instability; however, the country made some headway in 2016 with its Banking Law of Afghanistan which recognizes Islamic banks and Shariah windows. Almost half of the 18 licensed banks jumped at the opportunity to offer Muslim-friendly products.
Bakhtar Bank had its eyes set on becoming a fully-fledged Islamic financial institution as early as 2015 and, in the run-up to the central bank’s approval, began training its workforce, acquiring necessary technology as well as putting in place the required procedural checks and controls.
“In our preparation for conversion from conventional to Islamic banking, we have passed [the] 20,000 training days mark in our team’s capacity-building alone of which over 1,500 days have been spent by staff in trainings abroad,” Amer shared. The bank has 1,183 employees serving the country in 30 out of the 34 provinces in Afghanistan and reaches the entire nation through agency banking arrangements. Complying with local regulations and AAOIFI standards, the bank has designed its internal operations and manuals with help from EY and has set up a Shariah department, a Shariah board as well as an internal Shariah audit team.