Islamic Finance In Africa

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

Islamic finance has grown rapidly, even though it is still a small share of the global financial market. The Islamic banking segment has increased its penetration in many International Monetary Fund (IMF) member countries. It has become systemically important in Asia and the Middle East, while the global issuance of Sukuk – the Islamic equivalent of bonds – is expanding with remarkable international reach of issuers and investors. This trend is expected to continue, driven, in particular, by strong economic growth in countries with large, and relatively unbanked, Muslim populations.

Reflecting the importance of Islamic finance for many of its members, the IMF has had a long-standing interest in its implications for macroeconomic and financial stability, and played a key role in the establishment of the Islamic Financial Services Board (IFSB). The IMF has also engaged its members on the implications of Islamic finance, in the context of its policy advice and capacity development efforts, notably in the areas of regulation and supervision of Islamic banks, and development of domestic Sukuk markets.

This recent growth of Islamic finance has led to increased demand on the IMF. As a result, the IMF has formed an Interdepartmental Working Group with the objectives to develop an institutional view on the industry, build in-house expertise and better coordinate with different stakeholders. This working group has stepped up the analytical work on Islamic finance in key areas, including Islamic banking regulation and supervision, macro-prudential policy, safety nets, resolution, financial inclusion, consumer protection, monetary policy, Sukuk markets, public financial management, and tax policy.

ISLAMIC FINANCE IN AFRICA

A Dubai Chamber of Commerce and Industry study reveals the presence of large investment opportunities in the untapped sectors of Islamic economy in the African continent – especially in the field of Islamic finance, halal food and tourism. Conducted in association with the Economist Intelligence Unit (EIU), the study points to the growing demand in Kenya, Ethiopia and South Africa markets for Islamic finance products and banking instruments in asset management and takaful sectors.

It further revealed that the African region needs somewhere near $100 billion a year to fund its infrastructure needs. Sukuk lends itself well to Africa’s infrastructure gap, it said.

“Our global expansion strategy is to enhance the competitiveness of our members in emerging markets of the world,” said Hamad Buamim, President and CEO, Dubai Chamber. “While highlighting Dubai as the middle ground from where Asian companies can make entry into Africa, and to call upon African companies to set up base in Dubai and to benefit from the lucrative investment opportunities presented by the emirate’s vibrant economic sectors including trade, tourism logistics, and financial services. To this effect, we have set up two representative offices in Ethiopia and Ghana and are soon to open another two in Mozambique and Kenya,” said Buamim.

"Africa is the destination for future investments, and the Islamic economy sector in the continent is still in the growth phase, therefore we invite UAE companies to work in this area to make Dubai the Capital of Islamic Economy under the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, and to make their presence felt in these markets with their leadership and excellence,” he said.

The President and CEO of Dubai Chamber further stressed that this study is one in a series of studies on Africa developed by the Chamber, and is aimed at introducing businesses in Dubai to investment opportunities available in South and East Africa.