The growth of Islamic finance in Tanzania continues to be slow, but offers huge prospects in the near future. Despite the growth challenges that we see from banks offering Islamic banking, a few developments have also happened in the past few months.

We hope 2022 will be a turning point in many aspects, if all players in the ecosystem invest more, and the government provides the necessary environment for the industry to flourish.

Review of 2021
Banking industry
We did not see much in terms of balance sheet growth from banks offering Islamic banking services, but the announcement of CRDB Bank to enter into the industry was one of the promising industry news. CRDB Bank, a publicly listed bank, and one of the two largest banks in Tanzania by all measures, will soon launch its Islamic banking services. We hope this will catalyze the growth of the industry, given CRDB Bank’s sheer size in terms of balance sheet, branch network and strong market brand.

Capital market
We saw for the first time the issuance of maiden Sukuk in the market. Imaan Finance, a Shariah compliant microfinance company, issued a corporate Sukuk facility, which was oversubscribed by 37%. This indicated that there is an appetite in the market for not only alternative investment asset classes in the market, but also for Islamic financial assets.

Takaful
The wait for Takaful services in Tanzania is still on; the government is yet to sign and officially issue Takaful regulations, which will allow players to launch Takaful services in Tanzania. Various meetings and exchanges were conducted for the most part of 2021 between the government and CIFCA (the Islamic finance industry body); we hope the regulations will soon be finalized.

Education and awareness
We also saw a number of activities around education and awareness in the country, all aimed at promoting knowledge and awareness of the industry. Massive work was done by many industry players including CIFCA, AlHuda CIBE, Abraar Consult, Islamic Foundation and others.

Preview of 2022
We are optimistic for 2022, and look forward to many initiatives to start bearing fruit. The intensive work that has been going on for the past 10 years should soon start showing results for the industry.

We hope to see the following happening in 2022, God willing:

Takaful
The government should finally issue Takaful regulations to allow players to launch and start offering services. Some Takaful companies have already made the investments and are only waiting for some positive action from the government.

Sukuk
We anticipate more Sukuk issuances in 2022, and hopefully for the government to initiate a formal process for a sovereign Sukuk issuance. The government needs more than TZS100 trillion (US$43.29 billion) to implement its five-year development plan. Sukuk offer one of the options to bridge this funding gap.

CRDB
We are positive that CRDB Bank will launch its Islamic banking services by 2022; this is an important development for the industry. With its current customer base, the conversion of its customers to Islamic banking will lower its customer acquisition cost, and will effectively increase the uptake of Islamic banking services in the country.

Capital market
Shirkah was launched in 2021 with its Halal stock index to support Muslims to easily invest in Shariah compliant stock trading at the Dar es Salaam stock exchange. Shirkah is finalizing its web platform and robo-advisory app that will go into the market by 2022.

Awareness
We will continue to see further efforts in increasing awareness and promoting Islamic finance. The recently signed partnership agrrement between CIFCA and AlHuda CIBE in Dubai will surely increase more education and awareness activities in Tanzania, and this will also be complemented by other partnerships CIFCA has signed with other local players to hold a series of Islamic finance seminars.

Conclusion
The growth of Islamic finance in Tanzania requires ecosystem efforts, instead of players working in silos. We hope to see CIFCA playing its role as an industry body to continue bringing industry players together, and to ensure that all these efforts remain Shariah compliant.

We also hope the government will understand that growing an industry with an established legal and regulatory framework is possible but very challenging and it will take more time to unlock the industry. This calls for the government to finally issue the Takaful regulations and initiate its formal processes for the enactment of an Islamic finance legal framework.

Salum Awadh is CEO of SSC Capital. He can be contacted at [email protected]