Economist at the University of Ghana, Dr. Priscilla Twumasi Baffour, has stated that the non-interest banking and finance initiative introduced by the Bank of Ghana is an innovation that will help reduce the cost of production by providing cheaper financing in the financial sector.
This comes after the Bank of Ghana’s engagement with religious leaders on the non-interest finance and banking initiative to develop a regulatory framework for its rollout in the country, aimed at promoting inclusivity.
Speaking to Univers Business, Dr. Baffour explained that the initiative largely depends on the trust and moral uprightness of borrowers.
“The concept is that once profits are made by the entrepreneur, they have to share the profits with the investor. A lot of it therefore depends on trust and the moral uprightness of the borrower. I believe this is the reason the Bank of Ghana is engaging religious leaders, because there is the need to appeal to the conscience of borrowers so they can declare exactly how much they made out of the investment, and accordingly pay back some return to the lenders,” she said.
She further noted that the idea of non-interest banking is borrowed from Islamic banking principles.
“I think that non-interest banking and finance is essentially a principle borrowed from Islamic banking. The way it works is that funds are given to entrepreneurs or individuals who need them to work with, and once the funds are disbursed, no interest is charged,” she added.
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Story by Sandra Abena Bansah | univers.ug.edu.gh
Edited by Gabriel Tecco Mensah
