Anda di halaman 1dari 6

Focus: Middle East

Islamic Finance Goes to Africa

The Shariah-compliant financial products are widely available and used in countries such as Malaysia and the GCC region,
however, the sector has a huge potential in other emerging economies too.
By A. Rizvi, Dubai

oasting seven of the 10 fastest Islamic banking assets represent less than sub-Saharan Africa is projected to grow
growing economies in the world 5 per cent of the total African banking as- by nearly 60 per cent from 242.5 million
and home to a huge, mostly unban- sets. There is a huge potential for growth, in 2010 to 385.9 million in 2030. What
ked Muslim population, Africa has and Eng. Sonbol and Mr. Kunduku- we see now are many African countries
often been described as Islamic banking’s lam share their insights with TRENDS that have already started taking steps
new frontier. MENA on the subject. to support the local uptake of Islamic
Eng. Hani Salem Sonbol, Chief Executive financing mechanisms and indicating
Officer of International Islamic Trade Changing Trends their intention to participate in Islamic
Finance Corporation (ITFC), and Renoy Eng. Sonbol: Historically, Islamic finance transactions.
Kundukulam, Head of Wealth Manage- banking and finance assets have been
ment at Noor Bank, concur. concentrated in Islamic majority jurisdic- Expected Growth
Islamic finance has been rapidly tions like the Middle East and Malaysia, Kundukulam: More than 50 per cent of
growing across the continent, with go- where they account for more than 80 per Africa’s 1.2 billion population is Muslim
vernments and investors leveraging its cent of industry assets. However, in the thus it is not surprising that we have
potential. As per financial agency Moo- past five years, this trend has started to seen a substantial growth in the number
dy’s, Sharia-compliant bonds worth $2.3 shift, partly in recognition of the need to of Islamic banks in recent years. A nu-
billion have been issued in Africa, and leverage regions like Africa where Isla- mber of conventional banks have set up
the number of licensed Islamic financial mic finance should thrive. Islamic departments or windows across
institutions has risen to more than 80 in The continent has a Muslim popula- Africa in which they offer Shariah-com-
the last five years. tion of approximately 636 million, repre- pliant products. According to Moody’s
Still, African sukuk account for only senting almost 53 per cent of Africans. latest report, the share of Islamic banking
0.5 per cent of global sukuk issuance, and In addition, the Muslim population in assets is currently below 5 per cent of

20 TRENDS | Fall 2018

© Shutterstock

Fall 2018 | TRENDS 21

Focus: Middle East

© Reuters
Islamic finance is also addressed to those who prefer ethical and socially and South Africa are examples of this.
Several traditional banks across the
responsible banking products and solutions. continent have also started to offer Sha-
riah-compliant banking products while
the total African banking assets, but is their growth journey. Key among these some governments have either started
expected to rise to more than 10 per cent issues is the need to increase financial issuing international or domestic sukuk
over the next five years. inclusion among the wider population or Islamic bonds. Major in-roads are the-
It is pertinent to mention that we be- and to bridge the funding gap required refore being made towards ensuring that
lieve Islamic finance is not just restricted for infrastructural development and trade Africans benefit from Shariah-compliant
to those Africans who prefer to deal with connectivity. products and services.
Islamic financial institutions for religious Many countries have taken the lead
reasons, but also those who prefer ethi- by introducing legal and regulatory Active Government Support
cal and socially responsible banking pro- frameworks to promote the develop- Kundukulam: Africa is a region gifted
ducts and solutions. ment of Islamic finance products. Re- with large oil, gas and mineral resources
cent changes to Kenya’s stamp duty and which are essential for the growth of an
Bridging the Funding Gap VAT regulation to create a more level economy. That paired with the fact that
Eng. Sonbol: As economies across Afri- playing field between Shariah-compliant Africa is one of the most populated re-
ca begin to compete more and more on and conventional products as well as the gions with the current population excee-
a global level, Islamic finance presents a adoption of Islamic banks and takaful (Is- ding 1.2 billion and Muslims accounting
unique and relatively novel mechanism to lamic insurance) companies in Burkina for more than 50 per cent of it. These de-
help address key development issues on Faso, Nigeria, Tanzania, Tunisia, Uganda mographics alone indicate a potentially

22 TRENDS | Fall 2018

strong demand for Islamic financial ser-
vices and products.
Rapid wealth creation makes it easier
for Islamic banking to develop in the
region. During the last decade, the num-
ber of Ultra High Net-worth Individuals
(UHNWIs) has risen by 13 per cent in
Africa and is expected to grow further
by 33 per cent over next 10 years. In
fact, among the twenty countries whose
UHNWI population has grown the fastest
over the last ten years, 11 are in Africa.
Demand for Islamic products and ser-
vices has been rising significantly in re-
cent years. Several African countries,
including Senegal, Nigeria, Mauritius,
Gambia, have tapped into the sukuk
market; and countries like Egypt, Alge-
ria, Morocco and Sudan are planning
their debut sukuk issues over the next
few years.
Islamic banks have already started
increasing investments in key markets
across Africa, and there is also an active
support from African governments fur-
ther aiding the growth of Islamic banking
across the continent.
© Reuters

Supporting smes
Eng. Sonbol: Much of Africa’s popula-
tion is accustomed to informal financial
arrangements between friends and fa-
mily, while remaining resistant to taking
Islamic finance could become a key driver in mobilizing funding into Africa and
up banking with formal financial institu- shift infrastructure financing away from traditional banks.
tions. This limited financial penetration
in Africa presents vast opportunities for lives. For example, the recently launched aware of the alternatives open to them
innovation in the sector. West Africa SMEs Program, which is through Islamic financing tools.
Africa is already well known for aimed at improving and streamlining
pioneering microfinance products, mobile access to trade lines of finance and en- Infrastructure Financing
money and other non-banking financial hancing the capacity of SMEs by suppor- Kundukulam: A key enabler for deve-
tools. It can therefore be expected that, ting them in the submission process for loping a sustainable growing economy
Islamic finance products and institutions trade finance. is investing in its infrastructure. This
will become increasingly mainstream It is also worth noting ITFC’s inter- results in financing needs growing at
across the continent given the gaps they ventions in the agri sector, having pro- propelling rates. Islamic finance has a
fill. While the regulatory and knowledge vided over US$780 million financing to strong potential to become a key driver
gaps in Africa will take time to address, the cotton sector in Sub-Saharan Africa in mobilizing funding into Africa and
the positive trends are already evident. and approved 14 financing operations in shift infrastructure financing away from
ITFC is determined to take the lead in the same sector within West Africa, have traditional banks towards the sukuk
bridging these gaps by introducing va- positioned ITFC as the “Cotton Bank for market. We have seen many countries,
rious initiatives across African markets Africa.” We are committed to doing our including UAE, Bahrain, Indonesia, Ma-
towards advancing trade and improving bit to ensure that African markets are laysia and others, choose sukuk as an al-

Fall 2018 | TRENDS 23

Focus: Middle East

communities, who on religious grounds

Islamic Fintech is to be considered to help create the bridge for financial may be reluctant to accept financial ser-
inclusion, by contributing to job creation among other advantages. vices provided by conventional banks.
This makes the need for Shariah-com-
ternative to conventional debt financing, Africa, because it provides stable wage- pliant financial products more pressing,
especially for large infrastructure and paying opportunities for Africans thus both together with and as an alternative to
energy projects. promoting creation of a growing middle conventional banking and insurance offe-
Sukuk has gained popularity thanks class. This leads to African economic rings.
to its direct link with real economy and growth and welfare in the long run. Here at ITFC, our various trade finance
asset-backed transactions, as in the case and trade development operations across
of infrastructure financing. Economies in Islamic Fintech Africa are geared towards ensuring a high
Africa have already begun to enter sukuk Eng. Sonbol: The European Investment level of financial inclusivity. Additionally,
market. However, the share of African Bank estimates that in 2017, as many as Islamic Fintech is to be considered to help
sukuk market still remains insignificant, 350 million Africans did not have formal create the bridge for financial inclusion,
representing only 0.5 per cent of global bank accounts. Therefore, the availability which is achieved by contributing to job
sukuk issuance, according to the Moo- of Islamic finance products could go a long creation via facilitating financing opera-
dy’s report. way towards significantly increasing ac- tions, alleviating risk factors preventing
Islamic finance also contributes signi- cess to finance for Africa’s financially un- trade, building investment confidence in
ficantly to meeting the financing requi- derserved population. It is also important the least developed markets and enhancing
rements for SMEs, which is critical for to consider members of Africa’s Muslim export capabilities of member countries.

24 TRENDS | Fall 2018

Hani Salem Sonbol
Chief Executive Officer

© Shutterstock

Renoy Kundukulam
Head of Wealth Management

Ripe for Digital Banking ITFC’s Africa Dream also relaunched our digital platform
Kundukulam: Africa is home to the wor- Eng. Sonbol: Here at the International Is- with a number of services, which will
ld’s fastest growing population, which lamic Trade Finance Corporation (ITFC), make online banking transactions ex-
is predominantly unbanked. IMF esti- we recognise that Islamic finance is in- tremely convenient for the clients to
mates that only 25 per cent of the po- creasingly well placed to make significant do from the comfort of their home.
pulation of Sub-Saharan Africa have contributions towards meeting Africa’s fi- We also have our wealth management
a bank account. At the same time, the nancing needs. In 2017 alone, ITFC provi- team, which addresses numerous que-
region currently has 420 million unique ded US$826 million to support important ries from existing and potential clients
mobile subscribers, with a 43 per cent sectors such as agriculture, energy and based in Africa, who are interested in
penetration rate, and it is expected that entrepreneurship in Sub-Saharan Africa investing our sharia-compliant wealth
this number will hit over half a billion by region (SSA). In addition, from 2008 and management products such as sukuk,
2020, making Africa the fastest growing to date, ITFC has provided around US$4 structured products, mMutual funds,
mobile market. billion of trade financing to the SSA re- takaful products.
Thus, this is a market ready to be tapped gion, and over $15 billion on the African Our client-servicing model for Afri-
and a perfect region for digital banking continent, all fuelled by a confidence in ca is governed by a robust, cross-bor-
to be introduced and has the potential to the potential of the region and a drive to der regulatory framework, which takes
be a huge success. Due to the geographic shape a shared, prosperous destiny. into account both Africa and UAE’s
vastness of the continent, people would cross-border banking and compliance
find it more convenient to use online pay- Seamless Banking Experience with Noor laws and provides a seamless banking
ment channels to do their transactions. Kundukulam: At Noor Bank, we have experience for our African clients.

Fall 2018 | TRENDS 25