News Guide Africa

Tag: Kasoa Economist

  • ‘No interest, no conspiracy’ …Ghana’s flirtation with non-interest banking is not a Trojan horse for sharia law

    ‘No interest, no conspiracy’ …Ghana’s flirtation with non-interest banking is not a Trojan horse for sharia law

    By the Kasoa Economist

     

    A law permitting Ghanaian banks to operate without charging interest has sat, unused, on the statute books since 2016. Ten years, two elections and a currency crisis later, the Bank of Ghana has finally decided to switch it on. Some Ghanaians are behaving as though it switched on a caliphate instead.

    The central bank calls the product “non-interest banking” (NIB), a term it prefers to “Islamic banking” for reasons that are more diplomatic than technical.

    Under guidelines that took effect on January 13th, 2026, licensed institutions may now offer accounts and financing structured around profit-sharing, leasing and asset-backed trade rather than fixed interest. One bank has already applied for a licence, and four more are preparing to.

    The reaction from parts of the public, egged on by a handful of apologists, Islamophobes, and online commentators, has been to treat this as the opening move in a plan to Islamise the Ghanaian state. That claim does not survive contact with the guideline’s own text, nor with the experience of the dozen-odd non-Muslim countries that got there first.

    What the guideline actually does

    Strip away the theology and non-interest banking is a financing technique, not a legal system, Where a conventional bank lends GH¢100,000 and charges interest until it is repaid, an Islamic bank instead buys the asset the customer wants (say a delivery van, a plot of land, a consignment of cocoa inputs) and either sells it on at an agreed mark-up (murabaha) or leases it with an option to transfer ownership (ijara). Depositors, rather than earning a guaranteed interest rate, become partners in a pool of investments and share in its profits or losses (mudarabah). The three things the model rules out are interest (riba), contracts with excessive uncertainty (gharar) and pure speculation (maysir, roughly “gambling”). Everything else from capital adequacy rules, deposit protection, fit-and-proper tests for directors, to supervision by the Bank of Ghana stays exactly as it is for conventional lenders.

    Crucially, the guideline is legally anchored not in sharia but in ordinary Ghanaian statute such Section 18(1)(r) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), the Development Finance Institutions Act, 2020 (Act 1032), and the Companies Act, 2019 (Act 992). A non-interest bank in Accra answers to the Bank of Ghana, the Securities and Exchange Commission and the National Insurance Commission. The do not answer to a qadi, a caliph or a foreign religious authority. Paragraph 85 of the exposure draft goes further, explicitly banning religious symbolism from how these products are marketed. That is an odd thing for a supposed instrument of Islamisation to contain.

    None of this means the drafting is flawless. One sharp critique of the exposure draft noted that its definition of “non-interest banking” is circular. It defines the term by reference to itself, while nonetheless requiring compliance with the standards of the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). That is a fair complaint about regulatory craftsmanship. The central bank has tried to secularise the vocabulary while keeping the Islamic finance industry’s own technical standards intact, and the seams show. But a clumsy definition is a reason to tidy the paragraph, not a reason to suspect a plot. Confusing bad drafting with bad intent is precisely the error that has driven much of the public panic.

    The confessional test that isn’t

    The loudest objection is not really about riba or mudarabah at all. It is the fear that offering Islamic finance somehow imports Islamic law into Ghanaian public life more broadly, that a bank branch is the thin edge of a wedge leading to sharia courts, dress codes or blasphemy statutes. This treats a financial product as though it were a constitutional amendment.

    It is worth being blunt about what actually changes for a non-Muslim depositor in Kumasi or Ashaiman: nothing, unless they choose to walk into a non-interest bank and open an account. Nobody is compelled to bank differently, worship differently or dress differently. The comparison Ghanaian bankers have reached for, that using an Islamic bank requires no more religious commitment than a non-Catholic patient checking into a Catholic hospital, is apt precisely because it is mundane. Catholic hospitals in Ghana do not convert their patients, similarly, non-interest banks will not convert their depositors. What both offer is a set of ethical ground rules attached to a service, available to anyone who finds the terms attractive.

    What happened when the West tried this

    Ghana is not attempting anything novel. It is rather decades behind. A useful discipline for evaluating the “Islamisation” theory is to ask what happened in the places that ran this experiment first, none of which are remotely Muslim-majority.

    Start with Britain, whose Muslim population is a modest 5% or so of the total which is smaller, proportionally, than Ghana’s. In 2004 the Financial Services Authority licensed the Islamic Bank of Britain, the first standalone sharia-compliant retail bank in a Western country. Two decades on, the United Kingdom hosts more fully-fledged Islamic banks than any other non-Muslim state, alongside roughly twenty further institutions, including HSBC, Lloyds and, as of September 2025, Standard Chartered, offering Islamic-compliant products through conventional windows. London has become the Western hub of the industry. The London Stock Exchange had listed 57 sukuk (Islamic bonds) worth $51bn by 2015, and the British government itself issued £200m of sovereign sukuk in 2014, followed by a further £500m in 2021. Islamic banking assets in the UK grew 26% in 2023 alone, to $8.2bn. Fitch Ratings projected the growth to $15bn in the medium term. Nearly seventy British universities now teach Islamic finance as a discipline, and English law governs the majority of sukuk contracts written anywhere in the world. This is a quietly lucrative export of legal services that has nothing to do with religious observance and everything to do with commercial pragmatism.

    At no point in this process did Britain adopt sharia law, establish religious courts with civil jurisdiction, or dilute its secular constitution. British parliament remains sovereign, the Church of England remains established, and the whole apparatus of Islamic finance operates as a regulated financial-services niche supervised by the Financial Conduct Authority and the Bank of England, exactly as the Bank of Ghana proposes to supervise its own version. What changed was narrower and more useful. British Muslims and ethically minded non-Muslims alike gained access to products that had not existed before, and the City of London gained a new and growing export industry.

    Luxembourg tells a similar story with an even smaller Muslim population. The Grand Duchy hosted the first Islamic financial institution in Western Europe as far back as 1978 and became, in 2014, the first country in the eurozone to issue a sovereign sukuk (Islamic bond) of €200m. The Sukuk was oversubscribed, structured around the sale-and-leaseback of government office buildings. It has since built itself into the third-largest centre for Islamic investment funds in the world, trailing only Saudi Arabia and Malaysia, with the Luxembourg Stock Exchange listing more than €100bn of sukuk by 2023. Luxembourg did this to diversify a financial centre otherwise dependent on conventional fund administration and to capture investment flows from the Gulf. It did not, in the process, become any less determinedly secular or any more religiously conservative. If anything, the episode illustrates how thoroughly the “Islamic” in Islamic finance can be reduced, in practice, to a contractual technique for pricing risk.

    The United States offers the plainest evidence that this is a commercial instrument rather than a religious one. JPMorgan entered into a murabaha financing agreement with the Islamic Development Bank as early as 2006. Goldman Sachs and General Electric’s financing arm have both issued sukuk to diversify their investor base. None of these institutions did so out of piety, and none of them treated it as anything other than an additional line of business aimed at a pool of global capital, largely from the Gulf, that prefers Sharia-compliant structures. The United States did not, as a result, acquire sharia courts either.

    The case for Ghana, stated plainly

    Set against that backdrop, the practical argument for Ghana is straightforward. More than 42% of Ghanaians remain unbanked, disproportionately because they distrust the conventional financial system. Non-interest products, precisely because they are structured around shared risk and tangible assets rather than compounding debt, are one of the more credible tools for drawing sceptical savers into the formal system. Ghana’s Muslim population, 19.9% of the total, more than six million people, concentrated in the five regions of the north, represents an obvious and currently under-served market, but proponents are right that the appeal need not stop there: ethically minded savers of any faith have shown, in Britain in particular, a willingness to bank on Islamic terms purely because they dislike debt-based finance.

    There is a public-finance argument too. Ghana’s public debt burden makes conventional borrowing for infrastructure an increasingly hard sell to both citizens and creditors. Sukuk offer a mechanism to fund specific, asset-backed projects such as road construction, the revival of the Tema Oil Refinery, housing programmes etc by selling investors a share in the underlying asset rather than a promise to pay interest, in principle without adding to the stock of interest-bearing sovereign debt. Membership of the Islamic Development Bank, which several Ghanaian bankers have urged the government to pursue, would open a channel to Gulf development finance that Ghana’s conventional creditor base does not offer.

    Finally, there is competition for capital. Nigeria licensed its first full Islamic bank in 2011 amid controversy strikingly similar to Ghana’s current debate; Uganda followed with its first Islamic bank in 2024, aimed partly at its own 14% Muslim minority but pitched, like Ghana’s, at Sharia-compliant investors generally. South Africa and Ivory Coast have both eased legal barriers to sukuk issuance. A global industry now worth more than $3.5trn in assets is actively hunting for African footholds; the question for Ghana is not whether this market exists, but whether Accra or Lagos gets first claim on it.

    A modest, secular reform

    None of this requires Ghanaians to change their faith, their courts or their constitution. It requires the central bank to license a new category of financial institution, subject to the same secular oversight as every other bank in the country, and it requires sceptics to distinguish between a contractual innovation and a religious takeover. Britain did not become a theocracy because Lloyds started selling murabaha mortgages, Luxembourg did not import sharia law because its stock exchange lists sukuk, and American investment banks did not convert because they signed murabaha agreements with Gulf lenders. Ghana will not either. The real risk is not that non-interest banking imports Islamic law, it plainly does not, but that Ghana, busy relitigating a settled question, hands its Gulf-facing neighbours a head start it will spend the next decade trying to claw back.

     

  • Two economies, one country

    Two economies, one country

    Ghana’s growth rate depends on who you ask. That should worry the people who ask.

    BY THE KASOA ECONOMIST | ACCRA | AUGUST 3RD 2026

    Ask the African Development Bank how fast Ghana’s economy grew last year and the answer is 5.8%, with inflation down to 14.6% and the central bank’s policy rate cut by 350 basis points to 18%. Ask the World Bank and a rather different country appears with headline inflation of just 3.3% in February, a milder 5.1% growth forecast for 2026, and a story built less around monetary tightening than around a new offshore oilfield coming on stream. Both institutions are looking at the same economy. Neither is lying. That is the more unsettling possibility.

    Statistical disagreement between multilateral lenders is not new, and a gap of a percentage point or two in a growth forecast is the ordinary noise of economic modelling. What is harder to wave away is the inflation figure, where the AfDB’s 14.6% and the World Bank’s 3.3% are not measuring slightly different things. They appear to be measuring different months, different baskets, or different vintages of an economy that has been moving unusually fast. Ghana’s disinflation over the past two years has indeed been dramatic, but a nine-fold difference between two reputable sources is not a rounding error. It is a sign that Ghana’s statistical infrastructure is being asked to keep pace with a recovery that outran it.

    This matters more than it might seem. Investors, credit-rating agencies and Ghana’s own finance ministry all draw on these numbers to set expectations, price bonds and calibrate budgets. A pension fund manager in London deciding whether to buy Ghanaian eurobonds does not average the AfDB and World Bank figures. She picks whichever number suits her risk appetite, and worries about the other. A finance minister presenting a mid-year budget review, as Dr Cassiel Ato Forson did on July 23rd, must choose a single inflation assumption to build his numbers around, knowing that whichever he picks will be cited by critics as either too rosy or too gloomy. Divergent data does not average out into a sensible middle. It hands ammunition to whoever wants to make an argument.

    Some of the gap is methodological and defensible. The AfDB’s 14.6% plausibly reflects a year-on-year headline rate drawn from an earlier reading, capturing the tail end of Ghana’s post-crisis disinflation. The World Bank’s 3.3% looks more like a recent monthly print, taken after food and fuel prices had continued falling through the first quarter of 2026. Both can be true without contradicting each other, in the way that “it rained heavily this year” and “it is not raining right now” can both be accurate descriptions of the same country. The trouble is that neither institution’s report, in its public-facing summary at least, makes this clear enough for a non-specialist reader and precious few of the officials, journalists and traders who repeat these numbers are specialists in vintage-adjustment.

    There is a second, less charitable explanation, and it deserves airing rather than suppression, in the spirit of taking one’s own side’s argument seriously enough to test it. Multilateral development banks are not neutral computers. They are institutions with mandates, and mandates shape emphasis. The World Bank’s mission leans toward showcasing the success of the reforms it has helped finance the energy-sector clean-up, the cocoa restructuring, the new PECAN oilfield are all, in some sense, its own investment thesis vindicated. A lower inflation figure and a growth story anchored in new oil production reads as an institution pleased with its portfolio. None of this need be conscious cherry-picking. Institutions, like people, notice the data that confirms the story they are already telling.

    Ghana’s own statistical service is, in principle, the arbiter that should settle this. The Ghana Statistical Service publishes its own monthly consumer price index, and any credible number should ultimately be reconciled against it rather than triangulated from two foreign lenders with different reporting cycles. That the AfDB and World Bank figures diverge this sharply, rather than converging on the GSS’s own print, suggests both institutions are working from data with meaningfully different cut-off dates. This is an unglamorous explanation, but the likeliest one, and a reminder that “as of when” is doing more analytical work in African macroeconomic reporting than most headlines admit.

    The deeper lesson is not really about Ghana. Statistical capacity across much of sub-Saharan Africa remains thin, price surveys are conducted less frequently than in rich countries, and GDP rebasing exercises can move growth estimates by several percentage points overnight without the underlying economy having changed at all. When the underlying data infrastructure is this fragile, every multilateral report becomes less a measurement than an estimate wearing measurement’s clothing, and readers who treat these numbers with false precision are building conclusions on sand.

    None of this should curdle into blanket cynicism about African economic data, which is a lazier failure mode than the naive credulity it replaces. Ghana’s broad direction of travel such as falling inflation, a shrinking fiscal deficit, an oil sector adding new production, a currency under strain but not collapse, is consistent across every source, AfDB and World Bank alike, even where the decimal points disagree. The disagreement is real, but it is a disagreement about degree, not about direction. That is a meaningfully different, and less alarming, kind of uncertainty than it first appears.

    What Ghana needs, and what its statistical service, its finance ministry and its development partners could usefully coordinate on, is a single published reconciliation each quarter one table, one set of dated figures, footnoted by source and vintage, that journalists and analysts can cite without having to guess which institution’s number to trust this month. It is a modest, unglamorous fix for an unglamorous problem. But a country trying to convince bond markets it has left crisis management behind cannot afford to let its own success story be told in two contradictory voices at once.

     

  • From the emergency room to the wellness centre — but whose bill is it?

    From the emergency room to the wellness centre — but whose bill is it?

    By The Kasoa Economist

    There is a particular satisfaction that comes from watching a patient discharged from intensive care. Dr Cassiel Ato Forson, presenting Ghana’s 2026 Mid-Year Budget Review on Thursday, reached for exactly that image. The economy, he told Parliament, has moved “from the emergency room to the wellness centre.” It is a good line, and largely an honest one. It is also, like most lines a finance minister delivers with an election cycle somewhere on the horizon, one that deserves rather more scrutiny than applause.

     

    Start with what is genuinely impressive. Ghana’s economy has crossed $100bn in size for the first time, with real GDP growth of 6.0% in 2025, the fastest since 2019. Non-oil GDP, arguably the more honest measure of underlying health, expanded 7.6%, its best showing in fourteen years. For the evidence, the minister argued, that the recovery is not simply another commodity windfall dressed up as reform. Per capita income rose from $2,527 to $3,385 in a single year. Inflation has come down to 5.4%, comfortably inside the central bank’s target band. The government says it has already hit its statutory debt target of 45% of GDP, ahead of schedule. On paper, this is about as good a scorecard as a finance minister could ask to present.

    Then there is the announcement that will please fiscal hawks and irritate spending ministries in equal measure: no supplementary budget. “Mr Speaker, today I am not here to seek supplementary estimates,” Dr Forson told the House, promising instead to “realign” spending within the appropriations Parliament already approved. In a country whose fiscal history is littered with mid-year top-ups that quietly become the new baseline, a minister who declines to ask for more money is doing something almost countercultural. It should be noted, and applauded, on those terms alone.

    But note the framing, too. “Realignment” is a word that does a great deal of work without committing to very much. It allows a minister to claim discipline while still finding room. Later in the speech, to reject accusations that the government has been stingy, he pointed to GH¢48.8bn paid in public-sector compensation, GH¢21.5bn in interest obligations, $700m in Eurobond debt service, and GH¢10bn returned to domestic bondholders. These are not small numbers, and they suggest an administration still very much preoccupied with honouring the deals it made to exit default, rather than one free to spend as it pleases. The rhetorical trick of the speech was to use the same set of expenditure figures to answer two different critics: to the Minority, who accused the government of hoarding cash, the numbers prove generosity; to markets and the IMF, the same numbers prove restraint. Both cannot be the primary story.

    The minister was also careful to attribute the turnaround to “disciplined economic management rather than higher taxes”, tighter expenditure controls, modernised tax administration, reforms aimed at inflation targeting and exchange-rate stability. This is the more defensible claim, and probably the more important one. A recovery built on tax compliance and administrative reform is more durable than one built on a single good harvest or a lucky run in gold prices. Ghana’s finance ministers have a long history of discovering fiscal religion in the depths of a crisis and losing it the moment the numbers turn. What would be genuinely notable, more notable than any single indicator in Thursday’s speech, is if this government kept its reformist instincts once headline growth no longer requires them.

    There is a version of this review that reads as vindication of three punishing years of adjustment, and Dr Forson is right that Ghanaians, not the government, paid that price. His acknowledgment of that, pensioners absorbing cuts, businesses swallowing higher costs, households enduring a currency collapse and a debt exchange, was the most honest part of the speech, and the one line that deserved the applause it likely got. But an economy that has just crossed $100bn and posted its fastest growth in years is also an economy entering the part of the cycle where the temptation to loosen returns. The government’s insistence that it will not need supplementary estimates is a promise that costs nothing to make in July and everything to keep in November, when election-year politics start pressing on every finance ministry in the world, not just Ghana’s.

    None of this diminishes what has genuinely been achieved. A country that restructured its debt less than three years ago and is now debating the composition of a $100bn economy, rather than the terms of its next IMF review, has earned the right to a good news day. The test, as ever, is not what a minister says when the numbers are working in his favour. It is what he does in the two quarters after this speech, when the harvest effect on inflation fades, when cocoa prices stay soft, and when every backbencher in his own party starts asking why “realignment” cannot stretch to their constituency. Ghana has proved, convincingly, that it can take its medicine. The next test is whether it can stay off the diet once it starts to feel well again.