Developing Sustainable Islamic Banking System In Afghanistan: Insights From Malaysia's Success

Abstract

This paper investigates the potential for developing a sustainable Islamic banking system in Afghanistan, drawing on Malaysia’s advanced and successful model which holds approximately 65% of Sharia-compliant banking assets in the region. Islamic banking, grounded in Shari'ah principles such as the prohibition of interest (riba), uncertainty (gharar), and gambling (maysir), has garnered significant global attention due to its ethical foundation and appeal to communities seeking Shari'ah-compliant financial solutions. With over $2 trillion in assets, Islamic banking has made a profound impact worldwide. Malaysia’s dual banking system, inclusive regulatory framework, and innovative Shari'ah supervisory model have positioned it as a global leader in Islamic finance. However, Afghanistan, despite its challenges, has yet to develop a fully functional Islamic banking system. This study proposes that Afghanistan could benefit from adopting Malaysia’s model, emphasizing the necessity of a robust legal framework, financial literacy, and an inclusive environment for Islamic financial products Particularly in term of regulatory framework, shariah governance and financial inclusion. Utilizing a qualitative research methodology, the paper concludes that with strategic planning, collaboration, and a commitment to financial inclusion, Afghanistan has the potential to build a modern, ethical, and growth-driven Islamic banking system.