Islamic finance applies to all financial and commercial activities that respect the principles of Islamic law and jurisprudence, commonly known as Shariah or Islamic law. It is an ethical finance, not speculative and based on the real economy. The Central Bank of West African States (BCEAO) in its Regulation 002-003-2018 entered into force on the 21st March 2018 distinguishes two categories: (1) credit institutions exclusively involved in banking activity consistent with the principles and rules of Islamic finance and (2) credit institutions partially involved in it through a dedicated branch. SYLVIE SALLY KINDA COMPAORE writes.
In the West African Economic and Monetary Union (WAEMU) area, experiences in the banking sector are limited to the Islamic Bank of Senegal, the Islamic Bank of Niger and more recently, the Coris Group with the establishment of its Islamic window Coris Bank Baraka by Coris Bank International in July 2015 and followed by Islamic branches in Mali and Senegal in May 2018 and in Cote d’Ivoire and Benin in June 2018.
In Senegal, although there is increasing interest, Islamic finance remains in an embryonic state in a country where the banking sector is growing with a total balance sheet value of XOF6.24 trillion (US$11.07 billion) at the end of December 2016, according to the 2016 annual report of the Banking Commission mentioned on the website of the BCEAO.
Today, the sector consists of 25 banks and four financial institutions. Data on Islamic finance is very modest compared to that of conventional finance. In the banking sector, the Islamic Bank of Senegal and Coris Bank Baraka Senegal, the Islamic window of Coris Bank International in Senegal, are the main players.
As for microfinance, only the Partenariat pour la Mobilisation de l’Epargne et du Credit Au Senegal is active through its Islamic finance department. On the financial intermediation segment, CGF Bourse has put out on the market a mutual fund that is consistent with Shariah called FCP Al Baraka. Coris has a Takaful product with Sen Assurances through Senvie which is a life insurance solution consistent with the principles and rules of Islamic finance.
The WAEMU states have shown an increasing interest in Islamic finance products with Senegal having issued its second Sukuk program, which allowed it to raise funds to support its growth.
In terms of training, three Master’s programs in Islamic finance are available to date. These were launched by the Institute of Administration and Business Start-ups of the Faculty of Economics and Management of UCAD, in partnership with CIFIA Academy; CESAG in partnership with the IDB; and one initiated by BEM Management Business School.
Senegal is now a reference in the WAEMU area in providing Islamic financial products. However, it must be noted this is still not enough for a population of 16 million individuals of which 95% are Muslims. Evidence stated in the 2011-12 report on the review of the regulatory framework of the financial system in force for the development of Islamic finance within the WAEMU, sponsored by the Ministry of Economy, Finance and Planning of Senegal, confirms the need that stems primarily from the low rate of financial inclusion in the country. This is based on the survey of the financial inclusion situation in Senegal sponsored in 2017 by the ministry. The banking rate at the end of December 2016 stood at 18.5% as per Information Note 4th quarter 2017 No 52 on the BCEAO’s website.
The IDB has emerged today as one of Senegal’s largest donors. According to data from the same ministry, revealed during the review of cooperation between the two parties in August 2016, the IDB’s active portfolio in Senegal currently consists of 24 projects (36 operations) for a total amount of US$1.14 billion. Road and energy infrastructure, hydraulics, agriculture, education and social inclusion are the different sectors financed.
The Senegalese market for Islamic finance certainly has a bright future ahead following the entry of the regulatory framework on the 21st March 2018. The various Islamic finance instruments constitute a real opportunity to finance Senegal’s economy, revive employment, fight against poverty and improve the living conditions of citizens which will gradually uplift the development of the most disadvantaged countries in the African region. In order to achieve these, the concerned players in the Senegalese market should work together to put in place a favorable framework for good dissemination through enhanced awareness and effective communication.
Sylvie Sally Kinda Compaore is the group director of Islamic finance at Coris Holding. She can be contacted at [email protected].