Islamic banking stirs controversy in Tunisia
Tunisia’s recently founded Islamic banks have stirred a lot of controversy amongst economic experts, raising questions about how they will compete with more traditional banks and whether they need additional regulation
When asked about how the state can help the Islamic banking sector in Tunisia, the Director of Funding and Investment department in the Islamic Baraka Bank, Jilani Balagha, said new laws are needed to regulate the banks. But the laws also need to take into account the special way the banks operate, he added.
He also urged the government to use these banks to attract Arab investment, particularly from the Gulf region, because they are known to prefer Islamic banking over traditional banking.
Similarly a report published on Wednesday in the Tunisian daily "al-Sabah", suggested Islamic banks will help expand the work of the banking sector in Tunisia because many Tunisians consider dealing with traditional banks as prohibited by their religion.
Although, Tunisia has only two Islamic banks, the Zaytouna Bank (40 branches) and the Baraka Bank (eight branches), this sector is expected to grow rapidly because the country is ruled by the Islamist party, Ennahda.
“Islamic banking is based on providing the client with banking solutions accordant to Sharia [Islamic law].
"We don't give loans for building casinos or pubs, as this kind of business is prohibited in Sharia."
"Actually we are basically not giving any loans; we don't sell money for more money. We only sell goods or property,” said Balagha.
Under Sharia law if a customer doesn’t have the money to buy a $15,000 car, the banks purchases the car and sells it to the customer for a higher sum. It makes a profit from the higher price rather than the interest, he added.
“That is the main difference between us and the traditional banks, we don't sell money because it is prohibited in Sharia," he said.
The main problem affecting Islamic banks is people’s perception, added Balagha, "the people who used to deal with traditional banks are worries about dealing with us. These worries were actually put in their minds by the media machines of [ousted president] Zine el-Abidine Ben Ali's regime, which was fighting all the Islamic activities in the country.”