The Law and Practice of Islamic Banking in Ethiopia: A Critical Review of Constitutional Legitimacy and Dispute Resolution
The Law and Practice of Islamic Banking in Ethiopia: A Critical Review of Constitutional Legitimacy and Dispute Resolution
Mohammed Ibrahim Ahmed
 
Abstract: In response to the long-standing demand of Ethiopian Muslims, the government introduced interest free banking in 2011 by enacting two directives: 1) the Directive to Authorize the Business of Interest Free Banking No. SBB/ 51/2011; and 2) the Directive to License and Authorize Interest Free Banking Business No. SBB/72/2019. Although these directives oblige the application of Islamic laws for interest free banking transactions, Ethiopian courts do not yet regard Islamic law as the governing law for such transactions. Business disputes are still adjudicated under the civil laws by civil courts. Indeed, the introduction of a dual banking system in Ethiopia may create friction as to the legitimacy of the system between opponents and proponents of religious banking. This article analyses the existing legal framework of Islamic banking in Ethiopia and draws on the challenges that will arise from the introduction of an Islamic banking system. The article argues that a more liberal interpretation of some constitutional provisions can be construed in such a way so as to give constitutional legitimacy to Islamic banking, justified via different premises that comprise legal, economic, and social factors. Furthermore, the article proposes a practical dispute resolution framework for Islamic banking in Ethiopia with reference to the experiences of three key jurisdictions in this field, namely, Malaysia, Indonesia, and the United Kingdom. The article recommends that Ethiopia should adopt the Malaysian model, which has established dedicated benches that apply Islamic law alongside civil law in order to resolve Islamic banking disputes.

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