Ghana was not spared the global impact of the COVID-19 pandemic. The government of Ghana (GoG)’s response, according to the IMF, helped contain the pandemic and support the economy, but at the cost of a record fiscal deficit.
The IMF, after its Article IV consultation  with Ghana on the 19th July 2021, observed thus: “The pandemic had a severe impact on economic activity. Growth slowed to 0.4% in 2020 from 6.5% in 2019, food prices spiked, and poverty increased.
“The fiscal deficit including energy and financial sector costs worsened to 15.2% of GDP, with a further 2.1% of GDP in additional spending financed through the accumulation of domestic arrears.”
The GoG was quick to cite the IMF’s verdict that the economic outlook generally is improving, with the rebound coming despite the fact that risks remain, as well as the evolution of the pandemic and one of the biggest concerns of the economy, rising debt.
The existing Islamic finance ecosystem
Ghana’s Islamic finance space has been marking time over the years primarily at the stage of advocacy especially to the Muslim population on the importance of Shariah compliant banking.
Two of the most practical strides were Salam Capital’s microfinance proposition which unfortunately had challenges that saw it fold up, and the Muslim Ummah Development Initiative (MUDI)’s Halal investment program.
MUDI states on its website: “Our long-term vision is to provide Halal investment alternatives to the conventional investment channels in banking, financing, and insurance.”
Aside of advocacy, limited engagement with policymakers has also seen what is the most significant shift yet in the area of policy when in 2016, the Banks and Specialized Deposit-Taking Institutions Act 2016 was amended by parliament to include non-interest banking in Ghana.
One of the major issues that have been raised over the years has been for Islamic finance advocates to turn their focus to an incremental rollout of products especially by using windows in conventional banks.
With the acquisition of erstwhile Barclays Bank by ABSA Bank, it is hoped that an Islamic banking window will soon be opened especially given that ABSA’s parent bank in South Africa offers such a facility.
Review of 2021
2021 can best be described as a year in which the advocacy angle of Islamic finance received a big boost at different levels.
In March, the Kwame Nkrumah University of Science and Technology’s Short Course Unit ran a two-day program on Islamic finance with a view on the role it can play in Ghana’s infrastructure development.
It was led by head of the unit, Prof Naail Mohammed Kamil Dangigala, who took participants through a specialized training program on the Islamic finance ecosystem. Participants were from the public and private sector institutions.
In July, MUDI launched an expo, which is slated for January 2022, with the aim of creating a platform for Muslim entrepreneurs to exhibit products and services that are Halal (ethical) to both Muslims and non-Muslims in the country.
The Islamic Finance Research Institute Ghana (IFRIG) also held its second annual Islamic Finance International Conference (IFIC) in early November with a focus on how Islamic finance can cure the country’s rising public debt.
The discussion comes at a time when players in the political and economic fields are calling for a serious debate on the issue of the rising public debt of Ghana which according to the 2022 budget as a percentage of GDP stood at 77.8% at the end of September 2021, up from 76.1% at the end of December 2020.
Another significant engagement was IFRIG’s two-week Specialized Training on Islamic Finance for selected personnel of Bank of Ghana in August 2021. The training was held via Zoom with facilitators within and outside of Ghana.
Preview of 2022
IFRIG, with its new relationship with the GoG and the Ministry of Finance, will be looking to leverage on the initial training for GoG personnel to continue the capacity-building and advocacy efforts with other key stakeholders.
The Securities and Exchange Commission, the National Insurance Commission, the Ministry of Finance and Economic Planning and other players in the banking industry are all lined up for specialized training.
Also, MUDI’s 2022 expo will be keenly awaited as other interested parties leverage on the successes of the last few years to keep the dream alive.
With respect to official economic indicators, on the 17th November 2021, Minister of Finance and Economic Planning Ken Ofori-Atta presented the 2022 budget to parliament with some of the key takeaways being as follows: total expenditure (including clearance of arrears) is projected at GHS137.5 billion (US$22.13 billion), equivalent to 27.4% of GDP, and the 2022 estimate represents a growth of 23.2% above the projected outturn of GHS111.6 billion (US$17.97 billion), equivalent to 25.3% of GDP for 2021.
Without a doubt, there is potential for the Islamic finance space to keep growing in the country. According to finance experts who spoke at IFIC 2021, it would take a concerted effort by stakeholders to march toward the realization of the ultimate goal of a fully-fledged industry.
Partnerships at home and assistance from leaders in the subregion — especially in Nigeria — are two critical tools that can help advocates drive the dream to its destination.
Abdur Rahman Alfa Shaban is the communication director of the Islamic Finance Research Institute of Ghana. He can be contacted at [email protected]