Bankers Criticize CBE’s Refusal to Give More Islamic Banking Licenses

Some bankers criticized Central bank of Egypt’s refusal to give more Islamic banking licenses to four commercial banks after CBE’s governor Farouk El-Okdah had earlier announced in the parliament that CBE will approve giving Islamic banking licenses for banks if proved feasible.

Bankers were wondered how CBE’s refusal decision came after approving Bank for Development and Agricultural Credit’s (BDAC) demand for establishing 13 Islamic banks in 13 governorates.

Islamic banking did not flourish in Egypt as its volume is less than 4% because of CBE, bankers said.

Although disapproving conducting Islamic banking transactions by commercial banks because of being deceiving, Bassant Fahmy, banking expert and former consultant at Al-Baraka Bank, criticized CBE’s decision of not giving these licenses after  approving BDAC’s demand for establishing 13 Islamic banks last month.

The increasing demand on Islamic banking services will make CBE give the licenses, but maybe the regulator prefers to give the licenses for new Islamic banks instead of commercial banks.

Banks have to choose between commercial transactions or Islamic transactions and not to conduct both types of transactions, Fahmy said, adding that CBE has to assign a monitoring sector for Islamic Sharia-compliant banks.

CBE has no clear reasons for disapproving giving Islamic banking licenses, Alaa Bondok, head of Islamic mortgage at Societe Arabe Internationale De Banque. Bondok claimed the CBE’s decision affected negatively Islamic banking activities. Disapproved banks maybe not qualified enough, Bondok said. Many commercial banks will offer Islamic banking services in the upcoming period as there is an increasing demand on them.

Tarek Dessouky, head of Economical Affairs Committee at People’s Assembly (Lower House of Parliament), said that banks shall expand in Islamic services because of their high ability in attracting investments. CBE shall resume giving Islamic banking licenses after they were stopped since 1983 as many international banks allocated some branches to conduct Islamic transactions after Islamic banking system proved to be successful, Dessouky affirmed.

People’s Assembly is demanding from CBE to give more Islamic banking licenses because there is an increasing demand on them and to boost national production and economy.

Islamic banks shall have a separate budget and sharia-compliant regulations different from those for commercial banks.

Global statistics shows that Islamic banks increased to 500 banks in the world, with a value of assets registering US$ 800 billion. Commercial banks with Islamic banking licenses are 320 banks in the world, with a value of assets reaching US$ 200 billion in 58 countries.

There are about 200 branches providing Islamic banking services in Egypt, according to latest information data in late February. In addition, the volume of deposits reached EGP 80 billion and finance reached EGP 50 million. Besides, there are eight Sharia-compliant mutual funds in Egypt.