Investigation Into The Citizens’ Acceptance Of Islamic Banking And Qard Al Hassan Principle Into The Financial System In Libya

by Ali Khalifa Ali Stela


Islamic banking and finance is considered a novel way of conducting financial transactions for growth and social justice. It has expanded in an unprecedented manner since its initial appearance in the mid-1970s. Since then, Islamic banking has earned recognition worldwide which paved the way for a rapid growth in the Islamic banking services industry in the future.

Based on the above background, this study focuses on the potential of introducing a full fledge Islamic banking system in Libya, and the feasibility of introducing Qard Al- Hassan Banking system as the purest form of Social Islamic banking system in Libya . Since the 1970s the Libyan banking sector has witnessed remarkable changes especially after the state introduced the nationalisation programs and the socialist system.

Under public ownership, the banking industry, however, has underperformed due to various problems such as the high level of non-performing loans. Therefore, the state has recently initiated a reform and deregulates the industry to enhance the performance of the sector. This study aims to explore the potential demand for Islamic financial services in Libya by addressing the relevant issues.

The methodology of the study was through data collection, analysis of available banking system statistics and semi structured interviews with experienced bankers in Libya. The empirical research in this study was conducted in the city of Tripoli, one of the largest financial centers in the country.

For hundreds of years Islam has been the official religion. Soon after taking office, the revolutionary government expressed a clear desire to exalt Islam and restore it to its proper central place. Several steps have been taken by the government to show itself as a devout Islamic government. Hence this study attempts to explore this possibility of Islamic banking and finance in Libya by contextualizing it within the larger body of Libyan commercial banking and the transformation it has taken. The original conceptual model attempts to predict the possible success of the introduction of Qard AL Hassan Bank in Libya. In this study the diagram illustrates five variables taken as the possible independent variables that will indicate the success of the introduction.

From the theory, we could modify the conceptual model by including one important independent variable. This variable is ‘The First Initiative by the Government’ or ‘the Ultimate Leader as the Champion in Islamic Banking System’. The variable asserts that in order for Islamic bank or even the more challenging Qard al Hassan banking system to be implemented it must be endorsed or even championed by the ultimate leader as the Caliph in the Islamic Republic of Libya.

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