Demand and supply conditions for Islamic banking and finance in Libya

Abstract EN

This paper aims to explore the demand conditions for Islamic banking in Libya by referring to awareness, motivations, and expectations of the participants in relation to Islamic banking.

In fulfilling the aims of this study, primary data were gathered through questionnaire (quantitative) method in the early months of 2012.

The analysis of questionnaire data indicates that majority of the respondents had high hopes from Islamic finance as there is an overwhelming potential demand expressed by the respondents.

There is a support for a banking reform in Libya by incorporating Islamic banking into the system.

In addition, the results suggest that the Libyan people believe that promoting Islamic banking system will favour the process of economic development and social justice and in effect will alleviate poverty in the country.

It is important to note that particularly participants’ socio-economic development related expectations from Islamic banking and finance are rather high.

Therefore, study also found positive and strong support for non-banking Islamic financial institutions among the participants in Libya.

The findings also depict that participants’ understanding and knowledge of Islamic finance principles and instruments is rather limited which requires proper training.

As regards to the supply conditions, participants at the interviews particularly highlighted lack of proper regulative and legal environment and also of the shortcomings in human resources to develop Islamic banking and finance system.