The uptake of Islamic finance in African countries is a story that is becoming more common as the number of countries on the continent seizing the opportunity to take part in the growing Islamic finance industry continues to grow, seeking to source much-needed funding for infrastructure and developmental plans Islamically. As with more developed markets for Islamic finance, the names have become familiar: Kenya, Libya, Senegal, South Africa. Recent months have however seen the entry of a few new players, with countries including Ethiopia, Ghana and Uganda also exploring the options posed for Islamic finance.
A market for Islamic finance is present and growing in Ghana, as witnessed by the presentation of the IDB Women For Development Award 2014 to Ghana Islamic Microfinance at the Islamic Development Bank (IDB)’s board of directors meeting held last month in Jeddah. Ethiopia and Uganda both allow Islamic banking, with the practice approved by Uganda’s government last year and an Islamic Banking Bill making it’s way through parliament currently. Ghana seems to be following closely with the call for a vote for Islamic finance legislation coming from industry participants. In March this year, the Central Bank of Ghana stated that it would be reviewing the Banking Act 2004 to accommodate the introduction of Islamic banks to the country’s financial sector, and last month, following a two-day seminar held by the Global Institute of Islamic Banking, Insurance and Consultancy (GIIBIC), a communiqué was issued by participants calling for the issuance of ‘Sukuk for development’ by the Ghanian governing rather than costly international borrowing.
In Ethiopia, Oromia International Banking, a private bank, last month announced the launch of a savings account called Lebeik, which allows customers to save for pilgrimage. The bank provides funds in the form of interest-free credits for those customers, whose savings are insufficient to cover the cost of travel to the sites of pilgrimage. Introduced only in 2013, Islamic banking has found a specific market in Ethiopia according to Nuri Hussein, the acting director of Oromia International Bank, in an interview earlier this year: “The service is generally targeting the missing middle, which refers to the financing gap in capital in emerging markets that lies above micro-finance and below traditional institutional financing.” The bank has introduced Islamic banking at 46 of its branches and aims to increase that to 73 branches by this month. Oromia is not the only bank to have introduced Islamic services in Ethiopia with the government’s approval; in October the Commercial Bank of Ethiopia, the country’s largest bank with 725 branches across the country, also launched Islamic banking in 23 branches through a Shariah compliant banking window.
These opportunities are just a few materializing in Islamic finance in new African markets; in countries including Chad, Mali and Mozambique developments are being funded by the IDB, which last month dedicated US$180 million in loans to projects in Africa, as well as those services being offered by commercial and private enterprises expanding the network of Islamic finance across the continent. — RS