CONVERSION OF CONVENTIONAL BANKS TO ISLAMIC BANKS IN LIBYA: ISSUES AND CHALLENGES

Abstract

The process of conversion of conventional banks to Islamic banks commenced after the issuance of the Law No. 1 of 2013 which bans all interest transactions in the Libyan banking system. The purpose of this study is to explore the need for comprehensive guidelines for conversion to full-fledged Islamic banking in the country. The study adopts a qualitative approach to understand the phenomena of conversion of Islamic banking in Libya and the need for guidelines to facilitate the process. Open-ended interviews were conducted with six managers of Libyan banks to understand the need for guidelines for conversion to Islamic banking in Libya. The findings show that the interviewees have considerable understanding about the inadequacy of Law No. 1 of 2013 to achieve the conversion process. The interviewees also stressed their concern on the absence of guidelines and the adverse impact of this in the Libyan financial system. They also provided recommendations on how to overcome some of these problems. This research is one of few studies that focus on the concept of conversion to Islamic banking. The results of the study revealed the views of experts on the most prominent problems that face the Libyan banking sector regarding conversion to Islamic banking from a practitioners’ perspective.