CHALLENGES FACING ISLAMIC BANKING IN ZANZIBAR
Keywords:
Challenges, Facing, Islamic Banking, ZanzibarAbstract
Passion in the working of Islamic bankinghas been growing worldwide, not only among Muslims but also Non-Muslims, not only among individuals but within institutions too. A growinginterest has been perceivedrecentlydue to Islamic Banks’ role in providing affordable services and in a just manner to the customerswhere an effective framework is in place for its smooth functioning. In several places, despitethe usefulness of Islamic banking system, it encounters several challenges compared to conventional banks; the challenges include legal, regulatory and misconceptions or lack of understanding of their important features. This study is aimed at assessing the challenges of Islamic banking in Zanzibar.AMANA Bank and PBZ Islamic Banking Division were selected due to their popularity in Zanzibar; while PBZ was the first to establish a separate division to offer Islamic Banking services, Amana Bank was the first full-fledgedIslamic Bank. Branches in the Zanzibar Municipality were chosen as study population for collecting the data. The study applied the purposive sampling;whichgave theresearchersopportunities to decide participants to be plunged in a study according to study criteria. The quota sampling was used to divide population of challenges into strata to have a good representative of other Islamic banks and increased variability; In controlling the study,both primary and secondary sources of data were used. The bases of primary data were from employees of the mentioned banks. The secondary data werecollected from websites and other publications.The open-ended questionnaire was selected for data collection. Resultsfrom the studyshow that some people in Zanzibar lacked awareness on Islamic banking; mmajorityof the consulted were customers because of their faith. Moreover, a big segment of Zanzibar society could not differentiatebetween profit and interest. In addition, the study learned that there wereno Islamic Banking Regulations governing their operations, conventional bankingregulationsare used making the former to lack a competitive working ground. This study recommends more education and awareness on at least basic Islamic Banking Principles. Also, Islamic banks should offer services that meet affordable customer demand based on their faith. Finally statutory bodies handling Islamic Finance should learn from other countries how to handle these new experiences to make them appealing to the customers and contribute optimally in economic development of a country including financial inclusion.
Downloads
References
-Alam, Mohammed N. (2002), Institutionalization and Development of Saving Habits Through Bai-Muajjal Mode of Islamic banking Finance, (A unique means of mobilizing, rural saving towards productive sources).-Al-Jarhi, M.A. (2007), Islamic banking and finance.-Balla S., Zaha R. (2009), A Premier on Islamic finance, the Research Foundation of CFA Institute-Bacha, Obiyathullah I. (1997), Adapting Mudarabah Financing to Contemporary Realities: A proposed Financing Structure, International Centre for Education in Islamic Finance.-Bello, Shafi’i A., Hassan, Rusni Bt. (2014), Saving and Current Account in the Context of Shariah Contract, Arabian Journal of Business and Management Review ( Nigerian Chapter) vol. 1, NO 12 2014-Dinc, Y. (2017). The Functioning and Accounting of Musharakah Financing in Participation Banks and Firms; Problem and Recommendations. Assist Prof. Dr. Istanbul, Sabahattin Zaim University-Daly, Saida., and Frikha Mohamed. (2016), Banks and economic growth in developing countries: What about Islamic banks?, Cogent Economics and Finance, 4: 1, 1168728, DOI: 10.1080/23322039. 2016. 1168728.-Ebrahim, Muhammed S., and Sultan, H. (2011), Murabaha, Bangor Business School.-Elasgar, Hussein (2011), Principles of the Islamic finance: A focus on project finance.-Faisal, Mohammad. (2013), Islamic banking in India: challenges and opportunities. Aligarh Muslim University-Fatima, M. (2006), Differences and Similarities between Ijara and Conventional Operating Lease Contracts, College of Management sciences, PAF –Karachi Institute ofEconomics and Technology.-Habiba H. Omar and Mohd E. Yusoff (2019) Central bank impact on practicing Mudarabah financing in Islamic banks: the case of Tanzania. Banks and Bank Systems, 14(1), 81-93. doi:10.21511/bbs14(1).2019.08
SUMAIT University Journal (SUJ), Issue No.11, December 2022https://www.journal.sumait.ac.tz-Hailu, A. (2015), Challenges and Prospects of Islamic Banking for Resource Mobilization in Ethiopian Commercial Banks, Addis Ababa, Ethiopia -Heyder, A. (2021), Challenges Facing Islamic Banks. Universiti Teknologi MARA. -Hoong, Low S., Man, Ng Y., Selvaraja, Monica. , Zainordin, Nur A. (2016), Challenges and Opportunity of Islamic Banking and Financial Institutions in Malaysia. Kuala Lumpur.-Imran A., Ghulam S. Frequently Asked Questions (FAQs) on Islamic Banking, Islamic banking department, state bank of Pakistan, Karachi.-Iqbal, Z. (2007), Journal of Islamic Economics, Banking and Finance, Challenges Facing Islamic Financial Industry.-Jabr, H. (2003), Islamic Banking in Palestine, Challenges and Prospects. An-Najah University J. Res. (H. Sc), Vol 17 (1)-Kinyanjui, S.N (2013), Challenges Facing the Development of Islamic Banking, Lesson from the Kenyan Experience.Jomo Kenyatta, University of Agriculture and technology.-Mpalangulu, Madina M. (2015), Assessing Islamic bank operations in Tanzania, Dodoma. University of Dodoma-Mzee, Mustafa M. (2016), The Legislative Challenges of Islamic Banking in Tanzania, State University of Zanzibar.-Mohamed Muhumed O. (2012), Islamic Banking: Prospects, Opportunities and Challenges in Ethiopia, Addis Ababa University. Addis Ababa, Ethiopia.-Mzee, Mustafa M. And Othman, Ahmed A (2020), Issue and Challenges of Applying Islamic Banking in Zanzibar, A way forward, International Research Journal of Shariah.-Nagakawa, R. (2009), Evolution of Islamic finance in Southeast Asia, The Case of Malaysia.-Saeed, T. V. (2017), A brief study on QardhHasan, Hiba and Wadiah in the light of Islamic Jurisprudence, International Journal of Engineering Technology Science and Research, Department of Islamic Studies, Yobe State University. Damaturu Nigeria-Sulayman, Hamduni. I. (2015), Growth and Sustainability of Islamic finance practice in the financial system of Tanzania: Challenges and Prospects, International Accounting and Business Conference 2015, IABC 2015, Al-Maktoum College of Engineering and Technology, Dares Salaam, Tanzania.-Yusoff, M., Kamdari, A. (2016), The Contract of bay-al –salam and bay –al –istisna in Islamic commercial law: A comparative analysis. Presiding Persidangan Kebangsaan Ekonomi Malaysia Ke-11, Vol. 1, (pp. 590-594), July 27-28, Putrajaya: Malaysia.-The People Bank Of Zanzibar Limited, Audited Financial Statements For the year Ended 31stDecember 2018, TAC Associates, Certified Public Accountants, 10 Malik Road, Upanga, Dar es Sala