Africa

Islamic Banking Can Sustain #Somaliland's Development

A recent UNICEF survey indicates that Somalia is off-track in achieving Millenium Development Goals for Water, Hygiene and Sanitation, a challenge facing Somaliland as well. To off-set the developmental challenges, Somaliland ought to implement sound financial systems. International Development Agencies note that if Somaliland is to have full confidence in Islamic Banking, then it needs to standardise, deregulate and diversify the economy. That would attract more investment from multi-lateral agencies, such as the World Bank, Islamic and African Development Banks (AfDB) and the United Nations. New technologies, such as mobile banking, can enhance the hard to reach areas and further attract potential customers. DBI and Dara Salaam banks are both investing in the latest technology for improving the economy.

UPDATE 1-#Nigeria cenbank set limits on banks' investment in govt Islamic bonds

Nigeria's central bank has set commercial banks' investment in Islamic bonds issued by state governments to 10% of the total amount on offer and fixed a maximum tenor of 10 years for the bonds. The central bank said it considered the need to issue the guidelines to enhance the quality of sukuk instruments and to grant liquidity status at its discount window as well as for banks' liquidity ratio. Nigeria is working out details for issuing a debut sovereign sukuk and also planning to sell Eurobond to raise $1 billion this year. The regulator assigned a weight of 20% for capital adequacy for banks' investment in sukuk and a weight of 50% for Islamic bonds that do not qualify as liquid assets.

#Nigeria: Only 20 Percent of Muslims Access Financial Services - World Bank

According to The World Bank, less than 20% of Muslims use conventional banking worldwide, in spite of the ever growing number of Islamic financial products. The bank's Vice President and Treasurer, Arunma Oteh, said this in Washington during the World Bank High Level Seminar on Islamic Finance. Ms. Oteh said that the huge financial gap that exist in the Muslim world could not be bridged and the lack of trust of financial service providers was a reason for the disparity. She added that Islamic finance was a tool for achieving Sustainable Development Goals (SDGs) with Islamic investors applying the ethical and quantitative measures in their investment decisions.

Gulf investments in Africa beginning to spread far and wide

Traditionally, investments from the Arabian Gulf into Africa have focused on North Africa, but this scenario is slowly changing. According to the Economist Intelligence Unit, FDI inflows from the Gulf to sub-Saharan Africa topped US$9.3 billion between 2005 and 2015, with Kenya, Uganda, South Africa and Nigeria attracting the largest number of Gulf investors. Especially the sectors with high return margins are capturing the attention of investors. Saudi Arabia and the UAE are among the top investors on the continent when it comes to agriculture. The UAE’s Al Dahra Agriculture is investing in wheat farming in Egypt, while Saudi companies have invested heavily in Sudan’s agricultural sector.

#Senegal #sukuk leads #IvoryCoast and #Togo deals

Senegal raised FCFA200bn (around $341m) from a sukuk that raised FCFA50bn more than originally planned. Sukuk Etat du Senegal offers 6% a year profit margin, paid half yearly with a two-year grace period. The asset is backed by shares in the Léopold Sedar Senghor international airport. Senegal was the first country in the West African Economic and Monetary Union’s (WAEMU) to issue sukuk, with a debt deal worth FCFA100bn back in June 2014. Ivory Coast aims to raise FCFA150bn as part of a two tranche FCFA300bn sukuk program set up last year. The transaction is expected to deliver a yield of 6.5% and have a tenor of seven years. Meantime, Togo also aims to raise FCFA150bn through a 10-year sukuk offering a 6.5% yield.

CORRECTED-African sovereign trio add to growing appeal for #sukuk

#Senegal has upsized its second sale of sovereign sukuk, with #Ivory Coast and #Togo expected to close their own deals in coming days. Senegal issued a debut sukuk in 2014 and returned to the market in July with a 10-year deal paying a 6% profit rate backed by assets from Dakar's international airport. Senegal's sukuk raised a total of 200 billion CFA francs ($341.5 million) from an initial plan for 150 billion CFA francs. Ivory Coast is completing a sale of 150 billion CFA franc worth of 7-year sukuk, while Togo aims to raise 150 billion CFA francs from its debut sukuk, which has a 10-year maturity and 6.5% yield. Niger has also signed up for a sukuk programme to raise 150 billion CFA francs in two phases, although a timing has yet to be determined.

#Uganda: Govt to Extend Interest-Free Loans to Women Groups

More than 2,000 groups of women will acquire interest-free loans worth Shs43 billion from the government under the Uganda Women's Entrepreneurship programme (UWEP). According to Mr Puis Bigirimana, permanent secretary at the Ministry of Gender, women entrepreneurs are constrained by limited access to finance as they attempt to grow their businesses. UWEP will promote women's economic empowerment through entrepreneurship skills. Under the programme, groups will receive up to Shs12.5 million each while special projects that benefit a bigger community will receive Shs25 million. UWEP National programme coordinator Ms Brenda Kifuko said all beneficiaries will have to pay back to enable more women access credit. Groups that pay in the first year of reception will only pay the principle amount while groups that pay after the first year will be subject to a 5% interest rate in form of a service fee to cater for inflation.

HELB plans for shariah compliant loans

In #Kenya the Higher Education Loans Board (HELB) is set to introduce Shariah compliant products. The proposal to make the students loan provider Shariah compliant is currently being reviewed by the Attorney-General, prof Githu Muigai. Once approved, the law will improve access for Muslim students to educational financial support helping them to obtain loans which do not infringe on their religious beliefs. The number of Muslim students at universities has been on a gradual rise and the move will be of great benefit. HELB Chief Executive Charles Ringera said the board was with Islamic finance experts in the implementation of the policy.

Finance islamique : l’ICD accompagne le #Maroc pour émettre ses premiers #Sukuk

Le Maroc a choisi la Société islamique pour le développement du secteur privé – SID (Islamic Corporation for the Development of the Private Sector – ICD) comme arrangeur pour l’émission de ses premiers Sukuk. ICD conseille et accompagne les pays membres pour développer leur marché de capitaux islamiques, à travers l’émission de Sukuk à court, moyen et long terme, permettant aux Etats de diversifier leurs sources de financement. Les premières émissions de Sukuk au Maroc devraient intervenir au cours des prochains mois.

Islamic financing costs limit use in public projects

The high transaction costs involved in Islamic financing are likely to limit its use in funding infrastructure projects in Kenya. According to a new study commissioned by the Kenya Bankers Association (KBA) Islamic financing is deemed to be expensive. This fact is corroborated by the case study of Lekki project which utilised a loan financing scheme that attracts huge transaction costs paid by the special purpose company in terms of 1.5-4.0% one-off administration fees and notary fees. The working paper also recommended that a national Sharia board be set up so as to set standards for Islamic finance.

Client wants NBK’s Islamic banking shut in Sh3.7bn row

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.

Africa holds huge growth potential

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.

Islamic banking in Africa

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.

Sharia-compliant Helb loans plan for Muslim students

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.

CMA Banks on Islamic financing to address interest rates law shocks

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.

CIBAFI technical #workshops schedule announced

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.

US law firmS hired to advise on Islamic fund

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.

FG Wants Increased Islamic Bank Financing for #Nigeria, Others

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.

Islamic Development Bank opens Nigeria office

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.

You can finance your home the Islamic way

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.

Syndicate content