Financial Crime World

Strengthening Gambia’s Financial System: New Guidelines Issued by Central Bank

Banjul, The Gambia - In a bid to ensure stability in the banking sector and strengthen the financial system, the Central Bank of Gambia (CBG) has issued new guidelines regulating Islamic finance and microfinance companies.

Background

The CBG introduced amendments to the Financial Institutions Act 2003 and Insurance Act 2003 to cater for Islamic Banking and Insurance. The first Islamic insurance company was opened in 2005, while the first Islamic bank was incorporated and opened its doors to the public in 1997.

Challenges Facing the Sector

Despite these developments, there are still significant challenges facing the sector. A lack of awareness and capacity constraints have hindered the growth of Islamic finance in Gambia, according to a report by the CBG.

New Guidelines for Licensing Procedures

To address these issues, the CBG has introduced new guidelines for licensing procedures, including:

  • On-site examinations
  • Off-site monitoring
  • Collaboration with external auditors
  • Issue of directives

The bank also issued guidelines on minimum capital requirements, capital adequacy ratios, and management and technical services agreements. These guidelines aim to promote a safe and sound financial system by monitoring each bank’s compliance and performance against five “critical elements” and ensuring that corrective measures are taken in response to deteriorating compliance or performance.

Enhancing Supervisory Capabilities

The CBG has also established the Credit Reference Bureau (CRB), Financial Intelligence Unit (FIU), and Collateral Registry to enhance its supervisory capabilities. The CRB enables banks to share information on borrowers, while the FIU receives, analyzes, and shares suspicious transaction reports to combat money laundering and terrorism financing.

Weaknesses in Banking Supervision Framework

Despite these efforts, there are still some weaknesses in the banking supervision framework, including:

  • Lack of explicit deposit guarantee scheme
  • National crisis resolution framework
  • Specialized capacity building institutions in Islamic Banking and Finance

Recommendations for Strengthening the Financial System

To address these challenges, the CBG has called for:

  • Capacity building and public sensitization in Islamic Banking and Finance
  • Introduce mechanisms for cooperation and collaboration between member countries
  • Creation of National and OIC-wide Crisis Resolution Framework
  • Creation of Supervisory colleges to deal with cross-border financial institutions
  • Creation of Explicit Deposit Insurance Schemes in member countries
  • Creation of Collateral Registries to reduce default rates
  • Embrace International Standards such as Basel II/III, IFRS, AAOIFI, etc.

Conclusion

The CBG is committed to ensuring the stability and integrity of the financial system and will continue to work towards implementing these recommendations.