Islamic Banking in Tanzania: Hopes and Challenges.

After liberalizing banking and finance sector, Tanzania is among the countries in Africa experiencing new ways of banking to satisfy the needs of the market. From Mobile banking to Islamic banking, Tanzanians are witnessing new business ideas in the make of banking history. With old aged conventional banking dominating world economies, Islamic banking is growing very fast and it has established itself to be the alternative way to do banking business in a just and fair terms.

In Tanzania, there is a great demand that drives changes in the field, not for the benefit of the few but the whole community spiritually and materially. With an example of the bank like KCBT, which launched first of its kind Amana banking products in Tanzanian market. This launch brought new banking experience though limited services were on offer. With the launch of Amana Bank, Tanzanians must now try Islamic banking services without fear or prejudice.

Islamic Banking is banking without interest, but trading with profit. Interest is not paid not received as stipulated in Shariah (Islamic sacred law). Inspite many misconceptions that it’s for Muslims, all those who abhor interest in the conduct of  business are the target market for these products which has been structured under Qard Hasan, Unrestricted Mudharaba and Wadiah form of Islamic contract. ) while asset/lending side package has also began under Murabaha to purchase orderer.

While breathing the airstreams of hope to exonerate social and economic evils of interest, Islamic banking is bound by principles outsourced from Islamic commercial jurisprudence- fiqh Muamalat. The principles are such as absence of interest, usury or riba in letter and spirit under the adage ‘no pain no gain’. No Gharar [speculation] which refers to uncertainty principle and covers certain types of uncertainty or contingency in a contract.  The prohibition on Gharar is often used to justify prohibition of such conventional financial practices as speculation, gambling, short selling and derivatives; presence of social and ethical features such as avoiding undesirable investments and enhancing trade. Islamic investments exclude tobacco, alcohol, gambling and other "undesirable" sectors.

In the course of  its business growth, Islamic banking in Tanzania is expected  to face business challenges, operational challenges, legal and regulatory challenges which is the characteristic of lending products in the market through Shariah compliant instruments like Murabaha (Cost plus profit Sale), Bai Bithamanin Ajil [Spot delivery with future payments], Bai Salaam and Istisnaa (Advanced payment with future delivery of goods), Musharaka (Partnership/Joint Venture), Diminishing Musharaka, Mudaraba (Passive partnership), Ijara (Leasing), Ijara wa Iqtina [Lease to purchase] Qard Hasaan [Benovelent Loans], Sukuk (Trust certificates), Equity participation in form of shares of corporate entity among others. However, these challenges can be overcomed as days goes by.

By complying to the requirements of Sharia, Islamic banking deliver by  hundred per cent spiritual benefit and Sharia compliant products to the target market, by not giving interest and keeping far, customers deposits from supporting interest based/conventional lending and unethical investments successfully.