Al-Zantouti Writes: “Our Commercial Banks, Their Mysterious Identity, and Their Lost Role in the National Economy”

Financial expert Khaled Al-Zantouti has written an article titled Our Commercial Banks, Their Mysterious Identity, and Their Lost Role in the National Economy.

He reiterates the crucial role of commercial banks in driving economic growth and establishing sustainable development to build a strong national economy. Without delving into theoretical concepts, it is widely understood that commercial banks serve as repositories for public and private sector savings, converting them into investment channels through credit facilities that support sustainable economic development by financing individuals and businesses.

However, in Libya’s current situation, most commercial banks neither engage in proper credit operations nor structure them effectively. When credit does exist, it remains extremely limited, such as Islamic banks offering vehicle leasing (Ijara) or certain commercial banks providing temporary, unregulated credit coverage for traders. These activities often do not align with recognized credit matrices.

Al-Zantouti argues that no economic restructuring can be envisioned without an active banking sector facilitating directed credit for sustainable development, economic diversification, and GDP growth. The core issue, he asserts, is the lack of a clear and practical identity for both public and private banks. While their legal frameworks may define their roles, subsequent laws have rendered these regulations ineffective.

He calls on the new administration of the Central Bank of Libya to establish a clear identity for commercial banks: Are they Islamic, conventional, or a hybrid of both? He also raises the question of whether the interest rate prohibition law can be openly discussed or if it remains untouchable. Citing global legal perspectives, including the American legal system, he highlights that usury is prohibited worldwide, but its definition varies—even among Islamic scholars.

For instance, U.S. law explicitly bans usury, defining it as interest rates that significantly exceed market rates. If the current 10-year U.S. Treasury bond yield is 4.5%, a loan granted at 13.5% or higher would be considered usurious and illegal. This example underscores the need for a well-defined understanding of riba (usury) rather than a broad prohibition that lacks practical financial mechanisms.

Al-Zantouti emphasizes that Islam is a religion of modernity and adaptability, urging scholars and economists to engage in open, rational discussions to reach shared conclusions that respect Islamic principles while addressing contemporary financial realities. He asserts that banks must first define their identity—whether conventional, Islamic, or mixed—and subsequently develop appropriate financial regulations. Otherwise, Libyan banks will remain mere “salary shops” reliant on commissions and deductions at the expense of ordinary citizens.

He concludes with a thought-provoking remark: “Even near the sacred city of Mecca, both conventional and Islamic banks operate—so why not in Tripoli’s Red Castle?“