The Central Bank of Afghanistan will update the south-central Asian country’s financial rules, according to Jurist.org.
The Taliban-led bank has formed a panel to assess and amend the Central Bank Law and the Banking Law of Afghanistan. The seven-member committee has been tasked with tweaking the Central Bank’s Islamic banking network and abandoning the conventional banking system.
Written nearly 60 years ago, the Central Bank Law fails to provide grounds for an Islamic banking system. Rather, the rules provide ways through which Islamic and conventional systems can be implemented. Today, commercial banks offer teller windows for Islamic banking. They are regulated by the Central Bank’s regulatory framework.
The differences between conventional and Islamic banking are stark. Islamic banking does not offer loans or credit financing for industry and agriculture. The only exception to the rule is Qard Hassana, a so-called benevolent loan that is extended to the needy. The borrower need only pay back the amount they borrowed, with no interest.
Four years ago, the Central Bank licensed the first Islamic bank to the Islamic Bank of Afghanistan (BoA). Previously operated under the conventional banking system, the BoA applies interest-free principles of Islamic finance in all its operations. But since that license was issued, no other banks have been approved to operate an Islamic banking system in the country.
In February, PYMNTS reported international banks got the green light from the U.S. Treasury Department to allow money transfers to Afghanistan for humanitarian purposes.
The Treasury offered its guidance on exemptions on the sanctions issued in September and December for those who were concerned about breaching sanctions on the Taliban by sending financial assistance to Afghanistan.
Various sources had predicted in the recent past that the Afghan economy would collapse due to the absence of an efficient banking system in the country.
However, the Afghan Taliban had insisted that they would adopt Islamic financial principles to run their economy after taking over power in the country. The recent announcement seems to be a step in the direction they had decided to choose in the beginning.
At the end of 2021, The Financial Times had reported the Chinese mining companies had a strong interest in exploring vast copper deposits in the country.
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