Tanzania has seen remarkable strides in the development of Islamic finance over the past two years. Despite that fact that a lot still needs to be done, from a legal and regulatory framework to education and awareness, we must recognize and praise the milestones achieved so far. The years of 2021 and 2022 have been specifically remarkable in the development of new aspects of Islamic finance, with the main spotlight on the Takaful and Sukuk markets.
Review of 2022
Among the noticeable developments in 2021 was the official launch of Al-Barakah Banking, an Islamic division of CRDB Bank in Tanzania. CRDB is one of the two largest banks in Tanzania by all measures and its entry into Islamic banking was received with high optimism.
We also saw the maiden corporate Sukuk issued in the market by Imaan Microfinance, a Shariah compliant microfinance company in Tanzania, issued through a private placement. The Sukuk size was TZS2 billion (US$870,000); it was oversubscribed by 36%, generating total proceeds of TZS2.72 billion (US$1.2 million).
In 2022, the Islamic industry continued to see more strides being made by the industry, creating further optimism for industry optimists.
We saw Imaan Finance continue its series of corporate Sukuk, reaching a fourth issuance in a span of one year. The fourth Sukuk issuance targeting to raise TZS5 billion (US$2.14 million), was also oversubscribed by 106.4%.
The guidelines for Takaful were officially launched in May 2022 by the Tanzania Insurance Regulatory Authority, and this was cheered on by all industry players who have been pushing for the regulations for almost 10 years.
As if that was not enough, this year also saw the maiden public Sukuk issued by Sahl Bank, an Islamic banking division of KCB Bank Tanzania. The three-year Sukuk issuance was priced at 8.75% to be paid quarterly, with a target to raise TZS10 billion (US$4.3 million), with a greenshoe option of TZS5 billion.
Shirkah launches a mobile app
Shirkah, an investment platform that simplifies Halal investing in Tanzania, launched its Android app in 2022, with the iOS app to follow soon. The app allows its investors to invest in prescreened Halal investment opportunities across equities, Sukuk, real estate, commodities and start-ups.
Preview of 2023 and conclusion
We are very optimistic for 2023 to see bigger changes in the development of the Islamic finance industry in Tanzania.
We anticipate seeing initial arrangements for the government to issue treasury Sukuk as part of fulfilling its promises in its five-year development plan, which identified Sukuk as one of the potential instruments the government will use to finance its development projects.
We also hope to see a growing appetite in Halal investing as more education and awareness efforts are changing the people’s mindsets, and turning more into Halal investors who seek to exit interest-bearing instruments for Halal instruments such as Sukuk.
We saw the launch of Takaful guidelines in 2022, but we are yet to see the first Takaful company launching in the market. Hopefully, in 2023, the first licensees will hit the market and start offering their services.
Salum Awadh is CEO of SSC Capital. He can be contacted at [email protected].