In #Kenya a National Bank customer has asked the High Court to shut down the lender’s Islamic banking wing while demanding Sh3.7 billion compensation over a loan repayment dispute. Tulla Reserve Supplies claims National Bank illegally changed his facility from a fixed term loan to a revolving musharaka loan, effectively raising the interest rate from 18.5% to an Islamic profit-sharing equivalent of 19.5%. Director Diba Hussein Dado holds that the alleged switch to a revolving musharaka loan left his firm owing Sh922 million to National Bank. His firm supplied grains to Kenya Prisons, Unga Limited and World Food Programme (WFP). But National Bank insists that the contracts it signed with Tulla were for revolving facilities and Mr Diba has opted to feign ignorance in the hope of building a case against National Bank.
According to Standard & Poor’s Africa’s extensive infrastructure development needs to create a fertile environment for the growth of sukuk issuance over the next decade. S&P analyst Samira Mensah said African sukuk could provide diversification benefits for Islamic investors as well as additional financing opportunities. So far the African market comprises only $2 billion (Dh7.35 billion) of sukuk from a handful of issuers. By contrast, 17 Sub-Saharan African (SSA) governments issued $46 billion of conventional debt in 2015 alone. Despite sukuk’s appeal, analysts expect that only a few African countries will tap the sukuk market over the next 12 months. There is a general lack of clear legal regimes and in many cases the complexity of structuring sukuk could deter issuance. Multilateral institutions could be the key to unlock the full potential of Africa's sukuk market.
The African market for Islamic banking is unique for several reasons. The continent is witnessing an unprecedented economic growth in the last decade. Return on investment in Africa is higher than in any other developing region. Moreover, Islamic banking in Africa is supported by a growing openness and acceptability by many regulators and politicians. There is growing interest from sovereign states in issuing sukuk and countries such as South Africa, Senegal Ivory Coast and Togo have already tested the international market. At the same time, there is a need to be aware of the challenges facing the industry and how the associated risks can be mitigated. African regulators need to adopt the right policies and increase the level of cooperation. They should work closely with the multinational financial institutions such as the Islamic Development Bank, the African Development Bank and the World Bank.
In #Kenya the Higher Education Loans Board (Helb) has announced plans to introduce a Sharia-compliant product as a growing number of Muslim students join local universities. Helb CEO Charles Ringera said the proposal is contained in a Bill that is currently with the Attorney-General Githu Muigai for review. The new product will most likely assume the structure of Takaful finance. To roll out such a product, Helb will have to come up with special loan forms that require beneficiaries to commit that they will repay a Takaful contribution for the benefit of future students.
The Capital Markets Authority (CMA) of #Kenya is banking on introduction of non-conventional financing options. According to CEO Paul Muthaura the move aims to absorb anticipated economic shocks arising from capping of interest rates. Last week, President Uhuru Kenyatta assented to the Banking Act 2015, which will cap interest rates to not more than 4% above the Central Bank of Kenya rate. The CMA plans to introduce Sharia financing where interest rates don’t feature but have an element of risk management. The CMA is also working on establishment of a Sharia Board that would screen all the products being offered so that it can determine their suitability to be treated as Sharia products.
The General Council for Islamic Banks and Financial Institutions (CIBAFI) has announced the schedule of its Technical Workshops on Product Development for Islamic Financial Institutions (IFIs). The workshops will start on August 30 and will be organized in Bahrain, Saudi Arabia and Sudan. The three-day Technical Workshops aim to provide participants with hands on technical knowledge and skills pertaining to product development, with a focus on Islamic financial services. CIBAFI, as the voice of the industry, aims to provide platforms such as these to develop human capital and bring industry professionals together.
Ivorian Prime Minister Daniel Kablan Duncan has appointed US law firm Cleary Gottlieb Steen & Hamilton to advise his government. The Abidjan branch of Deloitte, led by Marc Wabi and appointed by the Islamic Development Bank (IDB), will serve as auditor. Deloitte's job will be to certify the value of the Abidjan International Trade Centre's buildings.
The federal government has asked for the scaling up of Islamic Development Bank’s (IDB’s) concessional resource and increased overall financing to Nigeria and other African member countries of the bank. Speaking at the inauguration of the IDB Country Gateway Office (CGO) in Abuja, the Minister of Finance, Mrs. Kemi Adeosun, said there are immense opportunities in Nigeria. The minister pointed out that Nigeria requires far more resources to face the challenges and diversify its economy. She also urged the the IDB Group to help in the recently constituted Buhari Plan for the Revitalisation of the Northeast Region of Nigeria.
The Islamic Development Bank (IDB) Group formally opened its Nigeria Country Gateway Office in Abuja. The new office has the mission to focus its services on health, agriculture, infrastructure, small and medium-scale enterprise and regional integration. IDB President Ahmad Ali said the group’s presence in Nigeria would strengthen socio-economic, technical and commercial cooperation between the bank and member countries in Africa. He added that this was important with the completion of the last portion of Trans Saharan Road linking Algiers in North Africa and Lagos. The Minister of Finance, Kemi Adeosun urged the IDB to support Nigeria’s effort to reconstruct the North East part of Nigeria devastated by years of militancy by insurgent group, Boko Haram.
In #SouthAfrica First National Bank (FNB) has been offering an Islamic home loan since the beginning of the year. The product is aimed at Muslims who want to finance their homes in a manner consistent with the requirements of their faith. But, like all Islamic financial products and services, it is open to everyone. FNB Islamic Banking’s home loan is not strictly a loan. It is modelled on what is known as a diminishing musharaka type of financial transaction. Amman Muhammad, the chief executive of FNB Islamic Banking, says the main advantage of the Islamic home loan is that it offers a competitive fixed-price deal in volatile economic conditions. Also offering Islamic residential property financing is the local arm of the international Al Baraka Bank.
The Islamic Development Bank (IDB) has promised to continue its support for Jaiz Bank Nigeria given that that Jaiz bank now has a national licence. IDB president Ahmad Mohamed Ali assured officials that IDB as an institution will continue to assist the Jaiz Bank. Chairman of the Jaiz Bank, Alhaji Umar Mutallab said with Jaiz bank’s newly acquired national licence from the Central Bank of Nigeria, the bank will soon start rolling out services nationwide. IDB is a shareholder in the Jaiz bank.
#Nigeria Deposit Insurance Corporation (NDIC) has challenged the management of Jaiz Bank to strengthen its corporate governance to face the current economic challenges of the country. Umaru Ibrahim, managing director of NDIC, gave the advice to the newly appointed managing director of Jaiz Bank, Hassan Usman. Ibrahim advised the bank to step up its public enlightenment efforts in order to increase deposits' mobilisation. He also noted the bank's challenges in investing its excess liquidity due to the absence of Sharia compliant investment windows. He noted that while a lot of countries had tapped into the Sukuk investment window, Nigeria was still lagging behind in this respect.
While Middle Eastern and Asian countries are leading the Islamic economy, Sub-Saharan Africa remains under-serviced. However, West Africa is seeing a marked uptick in Islamic finance, especially in the issuing of sukuk. Sukuk is increasingly being used to finance development projects, as well as to increase domestic capital reserves and financial inclusion. 2016 has seen a host of new sukuk issuances in West Africa. On August 10th, Togo’s initial CFA 150 billion ($263 million) sukuk offering closed. This comes after Senegal launched its second $263 million round at the end of June. As a result of sukuk’s unique traits, the IMF is promoting the regional adoption and inclusion of sukuk into African government debt strategies.
The growth of the Islamic finance industry has generated considerable interest and discussion in the financial world markets in recent years. According to a Senior Lecturer at the University of Nairobi School of Business Abdulatif Essajee, lack of information has inhibited the growth of the sector in Kenya. He projects a 25% growth in the coming years. The fastest growing segment in the world is the Issuance of Islamic bonds (Sukuk). In Kenya, the fastest growing segment is Islamic banking.
Ivory Coast plans to complete a sale of 150 billion CFA francs ($263 million) worth of Islamic bonds, following Togo's debut sale of sovereign sukuk launched last month. The two West African nations join Senegal in tapping the market for sukuk, expanding the use of Islamic financing options outside the Middle East and Southeast Asia. The Ivory Coast will sell the 7-year sukuk using ijara with the subscription period closing on Aug. 31. This represents the second phase of a 300 billion CFA franc sukuk programme set up last year by the Ivory Coast. Togo plans to complete the sale of its sukuk later this week, aiming to raise 150 billion CFA franc with a 10-year maturity and a 6.5% yield. The lead arranger for both the Togo and Ivory Coast sukuk is the Islamic Corporation for the Development of the Private Sector (ICD).
The Central Bank of Nigeria (CBN) recently released a new categorization system for "Non-Interest Islamic Microfinance Banks" (NIMFBs). CBN organized NIMFBs into three categories: "Unit", "state" and "national". Unit NIMFBs must have a minimum capital of NGN 20 million (USD 71,000) and may open one branch location within the same municipality as the organization’s headquarters. State NIMFBs may operate in one state if they maintain minimum capital of NGN 200 million (USD 350,000). Institutions in this category may open multiple branches in the state within which their headquarters are registered. A national NIMFB is permitted to operate in any state or territory of Nigeria so long as it holds NGN 2 billion (USD 7 million) in capital.
The State of Osun in southwestern Nigeria raised a sukuk bond worth 10 billion naira ($62 mn) from the capital market to fund educational development. After the recent trend of Eurobond issuance by African countries, Osun’s offering was sowing the seeds for more African sukuk. Prior to Osun, only Gambia and Sudan had issued local-currency short-term domestic notes. Osun's Governor Rauf Aregbesola believes that the potential of Islamic finance can also attract investors from the Middle East. Osun State’s planned multi-billion naira sukuk fund for education represents Nigeria’s most ambitious attempt to promote Islamic finance.
The State of Osun in southwestern Nigeria raised a sukuk bond worth ten billion naira ($62 mn) from the capital market to fund educational development. After the recent trend of Eurobond issuance by African countries, Osun’s offering was sowing the seeds for more African sukuk. Prior to Osun, only Gambia and Sudan had issued local-currency short-term domestic notes. Osun's Governor Rauf Aregbesola believes that the potential of Islamic finance can also attract investors from the Middle East. Osun State’s planned multi-billion naira sukuk fund for education represents Nigeria’s most ambitious attempt to promote Islamic finance.
In #South Africa First National Bank (FNB), Al Baraka and HBZ Bank are the only financial institutions offering Islamic banking services. These banks offer a range of Islamic cheque accounts, Islamic savings accounts and Islamic investment accounts as well as vehicle, property and asset finance. CEO of FNB Islamic Banking Amman Muhammad says the bank has seen a consistent rise in the number of South Africans taking up the bank’s transactional banking and investment, vehicle and property finance products irrespective of faith. Customers are looking for an alternative banking form and FNB can offer a principles-based approach. Muhammad says the normal regulatory and risk rules apply to all Islamic banking products.
Somaliland's President has signed the Central Banking Act into law. According to Central Bank Governor Abdi Dirir the Commercial Banking Act will be passed in the next three to four months.
Back in 2012 the financial sector agreed to have a Dual Banking system where both Conventional and Islamic banking systems operate in the country. However, the Commercial Banking Act is more than four years overdue. Economically, Somaliland's longterm competitiveness can only be ensured by introducing the Dual Banking System in the country.