Issues and Challenges of Islamic Banking: The Case of Gambia

Abstract

Islamic banking, which adheres to Shariah principles, has gained momentum in predominantly Muslim countries. However, in The Gambia, it remains relatively new, presenting both opportunities and challenges. This study explores the issues and challenges of Islamic banking in The Gambia, identifying its current state and customer’s level of knowledge and awareness. The study adopted a qualitative approach, utilizing structured interviews with key stakeholders, including Islamic bank officers, regulatory bodies, and customers. The study examines critical aspects such as the regulatory environment, Shariah governance, and market participation. Findings reveal that while Islamic banking offers growth potential, several challenges hinder its expansion. The regulatory framework is not specifically designed for Islamic banks and financial institutions. Although the Central Bank of The Gambia introduced guidelines (CBG) to regulate Islamic financial institutions, gaps remain as these guidelines are yet to make significant impacts. Other major challenges include a shortage of Shariah experts, Shariah non-compliance issues, operational inefficiencies, inadequate liquidity management tools, and limited Islamic banking knowledge among bank employees. Furthermore, while customers in Gambia are aware of the existence of Islamic banking in the country, their overall understanding remains low. Religious motivation is the main factor influencing customer preference. This study contributes to the literature by analysing Islamic banking challenges in The Gambia, a region with limited research on the topic. It provides recommendations to enhance regulation, improve Shariah governance, and increase awareness.

Keywords: Central Bank of The Gambia, Islamic banking, Islamic financial institutions, Islamic finance, Shariah governance, Shariah governance framework.