Home Islam Appetite for Islamic banking is building in East Africa

Appetite for Islamic banking is building in East Africa


Appetite for Islamic banking is building in East Africa

NAIROBI, Kenya- The Islamic Development Finance Corporation [IDFC] predicts that global Islamic finance assets could reach $3.8 trillion by 2024, up from $2.7 trillion currently.

This type of projection has spurred the demand for Sharia complaints products across the continent.

IDFC research also reveals that Muslims in Africa have access to credit and insurance, with conventional lenders and underwriters being joined by their Sharia-compliant counterparts offering Islamic banking products and services.

The East African region is among the areas with demand for Islamic products. The Kenya Commercial Bank Tanzania is the latest player in the financial sector to adopt Islamic products.

The lender launched its first Islamic bond worth $4.4 million to fund its portfolio of Sahl banking assets. The Sharia-compliant newspaper was opened on November 9 and closes on December 5.

According to Cosmas Kimaro-Managing Director -KCB Tanzania, “KCB Fursa Sukuk will offer Tanzanian and non-Tanzanian individuals, retailers, companies and institutions the opportunity to invest in the capital markets for three years with an expected return of 8.75% per year, quarterly.”

Those interested can invest as little as $218. KCB Tanzania plans to list the paper on the Dar es Salaam Stock Exchange upon completion of the initial public offering process.

The lender is now joining the league of NMB Bank and National Bank of Commerce in offering bonds this year.

NMB has issued an $11 million Jasiri bond targeting women’s businesses while NBC’s Twiga bond aims to raise $131 million to finance SMEs across Tanzania.

The rise in demand from non-Muslims in the East African region market for interest-free Islamic banking has been driven by a mix of high interest rates and poor banking services.

Fintech is also another driver for the strong adoption of Islamic products in the EAC region.

The high penetration of smartphones and internet in the Sub-Saharan Africa region has facilitated bringing credit and insurance closer to the underserved Muslim group.

Growth of Islamic products in Africa

Earlier this year, East Africa’s largest telco-Safaricom plc signed an agreement with Gulf African Bank (GAB) which unveiled the Sanctified Pesa Halal – the market’s first Shariah-compliant mobile finance service telecommunications in a context of growing need for digital financial inclusion.

Sanctified Pesa Halal is a financial savings channel that helps Muslim and non-Muslim customers access micro-savings and investment solutions that comply with Islamic laws on earning halal (permitted) profits.

GAB CEO Abdalla Abdulkhalik, “Our strategy is focused on digitization for financial inclusion. Our goal is to provide instant access to interest-free credit through Halal Pesa.

Safaricom and GAB’s move comes years after Kenya’s largest bank by assets, Kenya Commercial Bank, launched an Islamic banking unit dubbed “KCB Sahl banking”.

In South Africa, Islamic banking – which had a rocky start in 1980 due to apartheid and general ignorance – is seeing a steady increase in adoption thanks to Gulf investment.

In late 2014, the country’s treasury issued a record $500 million Sukuk (Islamic bond) – a first – in hopes of tapping into funding from the liquid capital markets of Arab Gulf countries and South Asia. -Is to reorganize the country’s ports, roads, hospitals and schools.

Figures from the Banking Association of South Africa now show that deposits in the South African halal bank exceed $2 billion and advances stand at $824 million.

According to Fitch Ratings, the Islamic finance sector in Nigeria is expected to continue its moderate growth trajectory in 2022-2023.

“Growth will be driven by top-down government support for the sector, issuance of Sukuk by the federal government, asset growth by newly established Islamic banks and enabling regulations,” it said in its January rating. .

Sharia banking has also continued to enjoy moderate growth in Ethiopia since 2008, when its conservative central bank allowed interest-free banking.