Islamic Fiance In Africa

Study reveals large investment opportunities in the untapped sectors of Islamic economy in the African continent...

Focusing on South Africa, the initial study states that Muslims represent 2.3 per cent or 1.3 million of the population in South Africa while contributing well over 10 per cent of the GDP. However, only 10-15 per cent of the Muslim population uses Islamic banking.

Islamic finance is slowly gaining ground in South Africa while the country has the most developed stock exchange leaving it well poised as a springboard for investment opportunities and penetration into the rest of the African continent.

In September 2014, South Africa became the third non-Muslim country, after Hong Kong and the UK, to issue Islamic-compliant debt setting a significant precedent in Africa. The $500 million sale, jointly arranged by BNP Paribas, Kuwait Finance House Investment Limited and Standard Bank of South Africa, was four times oversubscribed, with investors from the Gulf Corporation Council (GCC) getting over half of the subscription allocation.

The bond, which matured in June 2020, is part of the National Treasury’s objective to diversify its funding and investor base. The National Treasury is now working on issuing South Africa’s first domestic rand-dominated sukuk with the aim of diversifying funding and expanding Islamic finance beyond the banking sector.

Zambia

Zambia is laying groundwork to accommodate Islamic windows alongside its conventional banks, Islamic financing could play a key role in financing infrastructure, agriculture and manufacturing projects in the country which launched Islamic finance guidelines in an effort to develop regulatory framework for the sector.

Mozambique

As the only member of the Islamic Development Bank in Southern Africa region, Mozambique has received around $300 million investment by the IDB since the country joined the bank in 1995. Currently 22 IDB-funded projects, valued at more than $250 million, are under way.

Kenya

On Kenya, the study states that the country has a Muslim population of 14.5 million while Islamic banking commands a market share of about 2 per cent. Under the Capital Master Plan, Kenya has adopted a robust vision for developing Islamic capital markets. The country has an on-going partnership with the Qatari government to build capacity and develop the legal and regulatory framework to allow it to issue a sukuk, Islamic asset management and other Sharia compliant products. Dubai Islamic Bank has recently received, in principal, approval from regulators in Kenya to establish a branch in Nairobi.

Uganda

Uganda has a Muslim population of nearly four million, representing 12 per cent of the total population of around 30 million. The government of Uganda has approved the Financial Institutions (Amendment) Bill, paving the way for Islamic banking and finance in the country. A member state of the Islamic Development Bank, Uganda is seeing interest from both foreign and local financial institutions to offer sharia compliant services to the nation.

Ethiopia

There is significant growth potential in Islamic microfinance in Ethiopia. Around a third of Ethiopians don’t have access to formal credit and saving products. The country has to develop a comprehensive and adequate regulatory framework to grow confidence in this sector. The study showed that the Takaful market in Sudan is the most important market in Africa, the world’s third largest market after the Gulf Cooperation Council (GCC) and Malaysia.

Halal Food

The study pointed that Sub-Saharan Africa regional spend on halal food was about $150 billion in 2019. Emphasis has been mainly on halal meats and meat products, but over the past few years, the trend has been shifting to the introduction of halal franchises, prepared meals, canned, frozen and instant foods.