Libya central bank governor Saddek Omar Elkaber pledged on Monday the country will start implementing its new Islamic banking law by the end of the year and expected strong demand among the public for sharia-compliant financial services.
Tripoli has been working to amend its legislation to attract foreign investment and stimulate its private sector following last year’s war that ousted Muammar Gaddafi. It already approved an Islamic banking law in May.
“The demand is so high in Libya so we set up a higher committee for Islamic finance…Now they are working to set up a road map for Islamic finance in Libya,” Elkaber told reporters on the sidelines of an Arab central bankers’ conference in Kuwait.
He assured that Libya will start implementing the rules very soon, adding that the authorities envisaged several options for Islamic banking services including the granting of licence to conventional banks to open branches or windows for Islamic finance and permitting conventional banks to adopt Islamic banking. “Libya is also looking at introducing a special licence for Islamic banking,” he said.
Libyan financial authorities said the licensing option is still under discussion because they are yet to agree on capital requirements.
Observers say Gaddafi did not support the development of Islamic banking for ideological reasons, which follows religious principles such as bans on interest and pure monetary speculation.
Libya’s banking system under his regime was dominated by a few state-owned institutions. Most ordinary Libyans did not use credit cards and their banking services were largely limited to basic cash deposits and withdrawals, making it easier for Gaddafi to keep control over the economy and society.
Post-Gaddafi government is trying to develop the financial sector and the central bank has been looking to update a 2005 banking law which first allowed foreign banks into Libya.