Obstacles to the Transformation of Conventional Banks into Islamic Banks in Libya: The Case of Sahara Bank

Abstract

Recently, Libya witnesses the idea of shifting from the traditional to the Islamic banking system. Several banks have adopted the transition to a system of Islamic banking. Although some banks have completely transformed to the Islamic Banking, there still others which only adopt branches or windows of Islamic banking, within the whole system such as Al sahara Bank which is one of the biggest commercial banks in Libya. The aim of this study is to identify and analyze the barriers faced by the bank in the transition to the Islamic banking system. The study sample was chosen from the Central Bank of Al Sahara. The study was based on four important variables that may be an obstacle in the bank: Orientations of the Bank's management; administrative management; competencies and human expertise; and legislation and laws. The study used a descriptive analytical approach which helps to draw the connotations of the different meanings of the data and information, to explore the relationship between the variables, and give the proper interpretation with the predictability of future events regarding the studied phenomenon. The study also included field research through the design of questionnaire. From several results, the most important is that the independent variables (factors of Orientations of the Bank's management and competencies and human expertise) had a relevant statistical relation affecting the dependent variable (desire in the transition). The research presents a number of recommendations. Libyan expertise should be trained to work on the Islamic banking system. The Central Bank should encourage the traditional commercial banks toward transition and opening Islamic branches. it should also use the expertise and experiences of some Arab states toward transformation. An independent legitimate body should be assigned before the process of transformation to supervise it. Lastly, the main motive of the transition should be to comply with the provisions and principles of the Islamic sha'riah and the fear of the fighting of Allah and his messenger (pbuh) of usury dealing practice.