Growth in Islamic banking in Africa opens up employment opportunities
Islamic banking has shrugged off the financial crisis. In the world, Islamic finance assets have grown at double digit rates over the past five years and have now broken the $1,000bn barrier. In fact, the crisis has made Islamic banking’s ethical and risk-sharing approach all the more attractive and contributed to its growth well beyond the traditional areas of Asia and the Middle East.
Africa, where some 540m people - 50% of the population - are Muslim, is seen as a huge untapped market. Demand for Sharia-compliant products from Muslims who want to comply with their religious beliefs has been growing, and most countries, from Senegal to Uganda, from Kenya to Gambia, have already reformed banking laws to allow the setting up of Islamic institutions. However, the offer has not been keeping up with demand.
There are 38 financial institutions operating in this space in Africa. Kenya has been at the forefront: the government granted a licence as far back as 2008 and now has two fully-fledged Islamic banks, which represent around 1% of banking assets. Five conventional banks have also introduced Sharia-compliant products.
More recently Nigeria’s central bank has encouraged the development of Islamic banking, granting a banking license to Jaiz International Bank to open the country’s first Islamic bank. It is also planning to launch a debut sovereign sukuk (bond).
Africa holds “tremendous opportunity for Islamic banking,” says Wasim Saifi, Standard Chartered’s global head of Islamic banking. “We have reached a point where the regulators and governments are quite conscious this a key need of the market, it has reached a stage where it is no longer considered a niche industry.” StanChart is planning to offer Islamic banking services in Nigeria.
South Africa there are 1.3m Muslims, but only 10% currently use Islamic banking. Al Baraka Bank, first registered in 1989, was the first Islamic bank in the country and now there are three. The Treasury has expressed its wish to be a hub for Islamic product development and its roll-out into other African markets. The Government is planning to issue a sukuk, which could “open the door to a source of foreign investment beyond traditional Wstern funding,” Finance minister Pravin Gordhan has said.
A new report by KFH Research on the future of Islamic finance in Africa identifies promising opportunities in Kenya, Nigeria, Senegal and South Africa. Africa’s economic powerhouse is a “market with great potential for Islamic banking transactions” and its banks have the capitalisation, stability and regulatory discipline to be successful.
The report identifies lack of expertise as the biggest barrier to the expansion of Islamic banking in Africa. There is a dire need for competent employees who understand the products – and a great employment opportunity for young people willing to learn the right skills.
