With the COVID-19 health crisis, almost all sectors of activity have felt its impact in Senegal.
The banking sector in general, with the support of the Central Bank of West African States, has been able to set up a support system for individuals and businesses that are having difficulty repaying their loans due to the health crisis.
Islamic financial institutions in Senegal have not been significantly affected by this pandemic. They have suffered a slowdown in their activity following a decline in economic activity due to the semi-containment measures taken by Senegal as part of the fight against the health crisis.
Through the various financing, investment and support operations for disadvantaged areas in the world, the IsDB has made the Republic of Senegal understand that the development of the country really requires a strong involvement in Islamic finance activities.
Review of 2020
Since early 2020, the coronavirus pandemic has significantly changed the country’s economic outlook. In 2020, growth slowed sharply to an estimated 1.3%, with services (such as tourism and transport) and exports being particularly affected. Senegal responded by taking containment measures and putting in place an economic and social resilience program to protect lives and livelihoods.
The year 2020 was marked by the unwavering support of the IsDB in the development and growth of economic activity. In this sense, an IsDB financing program was carried out aimed at creating an environment favorable to the development of green sectors and green exports, with the implementation, at the national level, of measures intended to increase the production and marketing of green products, as well as to strengthen production activities in the value chain.
In addition, the US$31 million Agropole Sud project launched in the south of Senegal aims to create favorable conditions for private investment in the processing of agricultural products, agricultural inputs and services, and for building the capacities of value chain players to sustainably increase agricultural yields, as well as improving access to markets, knowledge, inputs and services.
It is also worth noting the support given to the Islamic Bank of Senegal by the International Islamic Trade Finance
Corporation, a member of the IsDB group, with funding of EUR8 million (US$9.43 million) to support the Senegalese private sector’s trade finance operations during the health crisis.
All of this is only a small glimpse of the real impact of the IsDB in support of Senegal through Halal financing. It also demonstrates the special interest that the IsDB has in Senegal for the development of Islamic finance activities. Moreover, the promotion of Islamic finance through the PROMISE program has made it possible to sensitize microfinance players as to the opportunity to bring about the emergence of Islamic microfinance.
During this health crisis, which had drastic economic consequences, the inadequacies of the conventional system were somewhat demonstrated. It is for this very reason that Senegal, through some of its ministries, is banking on the development of agriculture, in particular the rice sector, with techniques to support Islamic finance.
Preview of 2021
The health crisis has hampered economic growth including that of Islamic finance activity. A small margin of progress was noted in particular with the various actions carried out by the PROMISE program and the Islamic Bank of Senegal within the framework of the promotion of the financial model. However, the path is still far for a real boom in Islamic finance to happen in Senegal.
Despite all the actions carried out in the past, we realize that Islamic finance is evolving slowly in Senegal and still faces major constraints that the authorities are slow to address. However, it is up to Islamic financial institutions to seek the support of the state and the IsDB in particular for the revision of texts and the effective and efficient supervision of Islamic finance activities in Senegal.
The health crisis has exposed the limits of our economic and social systems, so 2021 will really be an opportunity for Senegal to make corrections and to recover with the instruments of Islamic finance. This, the Islamic financial institutions seem to have understood correctly. We will certainly see the forthcoming opening of Islamic microfinance institutions, Takaful societies and the implementation of collaboration programs with the High Authority of Waqf.
In view of the events that took place in 2020 not only in Senegal but also in the world, we should consider 2021 as a renaissance year and focus on the Islamic economic system, which has always remained flawless.
The health crisis that has engendered economic and social instability can also be considered as a warning sign for the real consideration of the need to integrate Islamic finance into the Senegalese economic system.
The Republic of Senegal has realized the true potential of Islamic finance and intends to rely on this system for the development of certain sectors. It is therefore up to Senegalese Islamic finance professionals to use all means to work for the supervision and development of these sectors.
The IsDB has played its role perfectly, and it is now up to Senegal and the banks and Islamic microfinance institutions to implement financing and investment programs aimed at supporting agriculture, livestock, fishing, industry and commerce.
In addition, the actions of the High Authority of Waqf must be increased and redirected in concert with financial institutions in order to support the sectors of education and health. Islamic finance in Senegal, despite the slow progress, has a really promising future and the Islamic Bank of Senegal will play a key role.