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A professor of Finance and Dean of the University of Cape Coast School of Business, John Gartchie Gatsi, has urged the government to seek alternative financing models to support infrastructure development, create jobs and improve the economic well-being of its people.
In line with that, he has suggested the government adopt the Islamic banking model as a viable option for accelerated growth.
Prof. Gatsi said such a measure would help open up the economy and reduce the over-dependence on conventional banking systems in the country.
The dean was delivering his inaugural lecture on the topic; “Islamic banking: Exploring an inclusive alternative or complement”, in Cape Coast, Central Region, last Thursday.
Islamic banking adopts Islamic principles of borrowing, which has no interests and ensures social justice and inclusion while promoting friendly environmental practices.
Prof. Gatsi said the over-reliance on conventional financial sources contributed to the failure to complete most projects on time and also increased the cost of borrowing.
"We find ourselves in a situation where we borrow so much but cannot account much in terms of assets that have been created by the debts we procure,” he said.
Prof Gatsi, therefore, said there was a need to ensure that loans were used for their intended purpose, because when projects were delayed, the cost would rise; thus, making borrowing less useful.
He traced the history of Islamic banking to the early 1960s and said it put less financial burden on the borrower.
Prof. Gatsi highlighted the country's outstanding debt which he said had exceeded 600 billion cedis, originating predominantly from the conventional financial system.
“All those debts are coming from the conventional financial system. So that is the extent to which we are relying on the conventional system,” he added.
The dean, however, said adopting Islamic banking to complement the conventional banking system could alleviate some of the financial strain bedevilling the country.
He emphasised that Islamic banking prospects were remarkable, saying it promoted a banking system of lending and borrowing devoid of interest in line with Islamic principles.
Prof. Gatsi further said it operated on profit and loss-sharing agreements and fostered partnerships, joint ventures and infrastructure financing without burdening the state.
However, in the case of the conventional banking system structure, the borrower starts paying coupons even when they have not finished utilising the money for projects for which it was procured.
The Vice-Chancellor of UCC, Prof. Johnson Nyarko Boampong, commended Prof. Gatsi for his scholarly contribution to the university and the economy of the country.
