East African Regulators Allow More Islamic Finance Services
By Njiraini Muchira
As the financial sector in the region grapples with a confidence crisis following the collapse of some banks, Islamic finance is expected to take root as governments enact laws that allow rollout of Sharia-compliant products and services.
Currently, the Islamic finance market is dominated by conventional banks that have Islamic banking windows to tap into the lucrative market. The region has lately witnessed a steady increase in Islamic banking, fund management, insurance (Takaful), microfinance and co-operatives where there are fully fledged Sharia-compliant financial institutions.
There are about 50 Islamic financial institutions in Africa, a majority of which are in North and West Africa. Globally, there are over 600 such institutions.
Data from the Islamic Corporation for the Development of the Private Sector (ICD), an arm of the Islamic Development Bank, shows that total global Islamic financial assets stood at $2.1 trillion in 2014, up from $150 billion in the 1990s. Africa accounts for only 2 per cent of global Islamic banking assets.
Islamic finance is projected to hit $6.5 trillion by 2020. In East Africa, however, no country has issued an Islamic bond (Sukuk), but Kenya and Tanzania have been considering tapping into the Islamic finance pool to raise funds for infrastructure development.
“Islamic finance is helping bridge the gap in financial access by tapping members of the Muslim faith who want to deal with Sharia-compliant institutions. That is why we expect more growth in the coming years,” said Adan Mohamed, Kenya’s Industrialisation Cabinet Secretary at the launch of Taqwa Sacco, a sharia-compliant savings and credit co-operative society that has been licensed to take deposits and offer banking services.
Taqwa, with 4,200 members, a deposit base of $3.7 million and a loan book of $3.5 million, is the first fully fledged Sharia-compliant Sacco in East Africa to offer front office services.
“We are creating a model to enable other Sharia-compliant financial instructions to follow as we deepen the Islamic finance market,” said Taqwa chairman Ahmed Yusuf.
Copyright reserved 2017