When the Taliban captured Kabul earlier this month, spokesman Zabiullah Mujahid claimed that life would return to normal as banks opened from Wednesday August 18, ordinary citizens and traders continue to face a liquidity crisis. A likely explanation: The Taliban want money matters to be governed by Sharia law, but Afghanistan’s traditional banking model is not Sharia-compliant.
Obviously, in the coming weeks and months, the Taliban will reshape the country’s banking system, tax laws and foreign exchange regulations – an opportunity that has caused concern and confusion among Afghans.
It left many wondering what kind of monetary model should emerge under the Taliban.
What monetary changes can be expected
Those familiar with Afghanistan’s economic affairs say that since the Taliban came to power on behalf of a Sharia-based government, it has been forced to change not only the country’s political structure, but also significant changes in its banking system , customs, and monetary systems.
Such changes could prove radical and make it difficult for the country to trade internationally or negotiate with monetary institutions such as the IMF and the World Bank.
Shaikh ul Hadith Mufti Kamaluddin Almustarshid of Jamia Islamia Clifton Karachi says tax reforms would be easier for the Taliban than other currency changes. Islam forbids unfair taxes, so the Taliban could revise tax rates and bring them down to an appropriate level.
“The Afghan banking system would require radical changes, however, as it is based on the traditional interest-based banking model,” Almustarshid said in an interview with SAMAA Digital.
He said an alternative to the traditional model is being practiced in various Muslim countries, including Pakistan, Egypt and Malaysia. Almustarshid suggested that the Taliban could replicate this Islamic banking system in their country.
When asked, Almustarshid said that cooperation with the IMF and other international monetary institutions may be permitted under certain circumstances.
Can Pakistan’s Islamic Banks Benefit From This?
Ahmed Ali Siddiqui, Head of Product Development and Sharia Compliance at Meezan Bank, says that only Islamic banking could be a suitable alternative to traditional banking in Afghanistan. He said many of the Afghan bankers had already been trained at the Pakistani National Institute of Banking and Finance – a subsidiary of the State Bank of Pakistan – and many more could be sent to Pakistan to be trained in Islamic banking.
Speaking to SAMAA Digital, Siddiqui said the Afghan central bank could potentially seek guidelines from the State Bank of Pakistan on Islamic banking regulations.
Siddiqui believes Pakistani banks have the potential to open branches in Afghanistan while Afghan Islamic banks may invest in Pakistani sukuk bonds.
Mufti Taqi Usmani offers help
When the Taliban ruled Afghanistan from 1996 to 2001, they found it difficult to reform the banking sector. At that time, Pakistan had not yet developed its interest-free Islamic banking system. The work on Islamic banking at Jamia Darul Uloom Korangi Karachi was still in its infancy. Those familiar with the events say the Taliban are keenly interested in the banking model being developed at Darul Uloom. She did not get a chance to implement the model and was soon driven out of the government by the US bombers.
Now that the circle is closed in Afghanistan, there is a possibility that the Taliban could benefit from the Islamic banking model prevailing in Pakistan.
Mufti Taqi Usmani, the pioneer of Islamic banking research, circulated a voice message to Taliban emir (Supreme Leader) Maulana Hibatullah Akhundzada and Deputy Emir Mullah Yaqoob (son of Mullah Omar) saying they were themselves need to focus on the Afghan economy and when they need help he was ready to help.