In April 2026, Afghanistan officially eliminated the interest-based banking system and transitioned completely to the Islamic banking model. This move is regulated by the Da Afghanistan Bank (DAB) which requires all financial institutions to comply with Sharia principles, including a complete ban on Riba.
This change marks the end of the conventional banking system in the country, making Afghanistan among the countries that have fully implemented the Islamic financial model in its banking sector.
Complete Transition of the Banking System
All commercial banks have now converted their operations to a Sharia-compliant model. Major institutions such as New Kabul Bank have also fully implemented this change.
In this new system, the concept of fixed interest is no longer used. Instead, banks and customers share the risks and profits in each financial transaction. This is different from the conventional system that guarantees a fixed return through interest rates.
Sharia-Based Banking Products
Financial services in Afghanistan are now focused on several main instruments:
Current accounts use the Qard concept, where deposits do not provide returns but are guaranteed to be safe.
Savings accounts use the concept of Mudaraba, where customers share profits with the bank based on investment performance.
For financing, banks use methods such as Murabaha, where banks buy assets and resell them to customers with an agreed profit margin.
This approach emphasizes fairness and risk sharing, as opposed to an interest system that sets returns without taking into account the actual performance of the economy.
Riba Ban Fully Enforced
In this new framework, any form of giving or receiving interest is completely prohibited. This includes conventional loans and financial products that previously relied on fixed interest rates.
This move is in line with the basic principles of Islamic finance that reject elements of exploitation and emphasize transactions based on real assets.
Although this transition is seen as a major step, the Afghan banking sector still faces several major challenges.
Among the most critical issues is the difficulty in international payment transactions. The global financial system, which is still dominated by conventional models, makes it difficult for Afghan banks to integrate into the global network.
In addition, liquidity problems are also a challenge when access to external funds is limited. This strains banks' ability to provide financing and maintain operational stability.
