IslamicFinance.de

A newly released report "Islamic Finance in Africa: Unlocking Opportunities for Growth" studies the evolution of the Islamic finance industry in Africa. Moreover, the report, a joint publication by Kuwait Finance House Research Limited (KFHR) and Malaysia International Islamic Financial Centre (MIFC), highlights the exciting growth prospects for the various Islamic finance segments on the continent. Africa's presence in the global Islamic finance landscape is growing, albeit from a small base. The sukuk market in Africa holds great potential over the medium-run, amid unprecedented funding needs for infrastructure building. Aside from the sukuk market, Africa's Islamic funds markets holds potential in the medium-run. The Islamic banking sector has recorded solid growth, and demand for takaful products in Africa islikely to increase.

This paper provides a survey on Islamic Finance in SSA. Ongoing activities include Islamic banking, sukuk issuances (to finance infrastructure projects), Takaful, and microfinance. While not yet significant in most Sub-Saharan countries, several features make Islamic finance instruments relevant to the region, in particular the ability to foster SMEs and micro-credit activtities. As a first step, policy makers could introduce Islamic financing windows within the conventional system and facilitate sukuk issuance to tap foreign investors. The entrance of full-fleged Islamic banks require addressing systemic issues, and adapting the crisis management and resolution frameworks. The IMF can play a role by sharing international experiences and providing advice on supervisory and regulatory frameworks as needed.

Le cabinet d’avocats d’affaires international Clifford Chance conseille la République du Sénégal sur sa première émission de Sukuk de 100 milliards de francs CFA (environ 200 millions de dollars US). Il s’agit de la première émission souveraine de Sukuk importante réalisée en Afrique. Le Sukuk a été structuré sous forme d’Ijara. La République du Sénégal a accordé un usufruit de 99 ans sur certains de ses actifs et a décidé de les louer en retour pour effectuer des paiements de loyers aux investisseurs. L’opération a été garantie par la République du Sénégal. Les arrangeurs de cette opération sont la Société islamique pour le développement du secteur privé et Citi.

Countries including Pakistan, Tunisia and South Africa are drawing up plans to issue government bonds that comply with Islamic law as they seek to take advantage of strong investor demand for emerging market sovereign debt. Tunisia is working with the Islamic Development Bank to issue a 1bn dinar ($580m) sukuk this year, while Jordan has instructed a committee to look into the possibility of issuing sukuk next year. Governments in South Africa and the Philippines also say they are considering raising money through the sale of Islamic debt.

The Gulf banks are fast replacing European lenders in expansion within the Middle East region and into some of the fast growing emerging markets in Asian and Africa in the context of improving health of their balance sheets and strong support from shareholders. Banks from GCC, particularly those from the UAE and Qatar are in the forefront of overseas expansion.First Gulf Bank (FGB), for example, announced last month that it has a new representative office in South Korea as part of plans to expand its presence in Asia Pacific. Qatari banks have been seeking overseas expansion to cut dependence on local markets and access trade flows across the Middle East, Africa and Asia. Doha Bank is expanding its presence in Hong Kong, India and Saudi Arabia.

THE government has been advised to look into the possibility of enacting a law to regulate establishment and operations of Takaful in the country. The Commissioner of Insurance, Mr Israel Kamuzora, said this in Dar es Salaam recently when briefing the Minister of State in the President’s Office (Special Duties) on the activities of the Tanzania Insurance Regulatory Authority (TIRA). He said the proposed law would provide guidelines in establishment and operations of insurers providing services that are in compliance with Shariah - Takaful. In Tanzania only few banks including the National Bank of Commerce (NBC), Amana Bank, People’s Bank of Zanzibar (PBZ) and KBC Bank offer Shariah compliant services. The Minister for Finance, Ms Saada Mkuya Salum, last month encouraged more local banks to provide Shariah compliant banking services to attract more Muslim customers.

Hajara Adeola, managing director, Lotus Capital Limited, has spoken on the benefits of the forthcoming listing of first Sharia Compliant Equity Exchange Traded Fund, the Lotus Halal Equity Exchange Traded Fund (LHEETF) on the floor of the Nigerian Stock Exchange via an initial offer for subscription. he TLHE ETF will be very liquid, he said, since its units can be bought and sold any time on the Exchange. More so, investors who hold a minimum of 5,000,000 units of the LHE ETF can exit by exchanging their LHE ETF units for the relevant number of the Fund’s underlying shares. Investors can either subscribe via a cash subscription or via in-kind subscription by the delivery of the stocks of the constituent companies of the NSE- LII in exchange for units of the ETF.

The Maidah Foundation, a non-governmental organisation for muslim women entrepreneurs has urged the federal government to adopt a non-interest financing to boost micro small and medium enterprise (MSME) in the country. This is contained in a communique read to newsmen by the Secretary-General of the Foundation, Hajia Latifat Balogun, at its stakeholder forum in Abuja. The communique said the development had capacity to bring millions of unbanked Nigerians to the formal sector. The communique further said the foundation was prepared to support government efforts to formulate appropriate template for the adoption of the new finance regime. The objective of the foundation is to contribute towards the economic development of women entrepreneurs in the country.

Following the receipt of the Securities and Exchange Commission clearance of the Offer Documents in respect of the proposed initial offer for subscription of 100 million units of the Lotus Halal Equity Exchange Traded Fund, Lotus Capital Limited has announced the successful hosting of the signing ceremony in respect of the proposed initial offer. The board of directors of the company and relevant professional parties, including Vetiva Capital Management Limited (issuing house to the offer), were present to execute the offer documents during the signing ceremony. Lotus Capital, upon receipt of final approval from the Securities and Exchange Commission, plans to launch the Lotus Halal Equity Exchange Traded Fund, an Exchange Traded Fund (“ETF”) based on the NSE Lotus Islamic Index.

The chairman of the Board of Directors of Jaiz Bank Plc, Umaru Mutallab, has charged the Central Bank of Nigeria (CBN), and other regulatory authorities in the banking sector to urgently consider developing Sharia-compliant liquidity management instruments for non-interest Islamic banks to invest in. Moreover, the process needed to be expedited to create a level playing field for all the participants in the financial service sub-sector including micro, small and medium enterprises (MSMEs) that so badly needed non-interest loans for their businesses, he added. Meanwhile a communiqué issued by Maidah Foundation, a network of Nigerian Muslim women entrepreneurs, prayed the federal government to strengthen the role of Islamic organisations in the creation of funds for the Nigerian entrepreneurs.

Growing their business remains the primary and dominant goal for high net worth business owners in the Middle East, according to a recent study on the wealth management needs and preferences of high net worth (HNW) business owners in Asia, Africa and the Middle East. The report by Standard Chartered Private Bank and Campden Wealth Research showed that 82 per cent of Middle East based high net worth business owners surveyed have already internationalised their businesses, implying the need for international banking services that support the geographic reach and growth of these businesses. Increasing market share is the top growth objective (82 per cent) of participants, followed by increasing production capacity (65 per cent) and international expansion (58 per cent).

The SME space is seeing tremendous growth in Africa, with easier access to funds from financial institutions and government policies encouraging sector growth. However, there still exists a ‘missing middle’, which finds it hard to access funds due to the category of funding they belong to; people that require between $50,000 and one-two million dollars. A new system of investing; impact investing, which started in 2008 after the global financial crisis, has been addressing the needs of this ‘missing middle’. The Africa Impact Group, for example, has been working towards helping Africa benefit from socially responsible investing through its activities.

On the African continent, the Islamic finance market’s assets are estimated to be more than $1.6-trillion (about R17-trillion) and are expected to surge to more than $5-trillion by 2020. The growth of Islamic banking has not gone unnoticed by the National Treasury. Earlier this year, former finance minister Pravin Gordhan revealed that South Africa will launch sukuk. Several banks like Absa, FNB, Al Baraka Bank and HBZ Bank offer Islamic commercial and corporate banking products in South Africa. The total Islamic banking sector in South Africa is estimated to be worth as much as R12-billion. However, the banks have their sights also set on expansion beyond South Africa’s borders.

Nigeria’s Jaiz Bank Plc has recorded a 141 percent increase in total assets, from N14 billion ($86 million) in 2012 to N34 billion ($209 million) at the end of the bank’s 2013 financial year. Customers’ deposits experienced a similar exponential surge to N21.9 billion ($134.3 million) - a 567 percent increase over the previous year. Last week, the bank announced that its social responsibility unit, Jaiz Foundation gave N10 million ($61,000) relief materials to victims of Boko Haram bombing in Borno State. Jaiz hopes to get a National operating license before the end of the year. Besides, the bank hopes to list on the Nigerian Stock Exchange in the next few years to avail more Nigerians the opportunity to invest in the bank.

Shareholders of Jaiz Bank Plc yesterday approved the bank's bid to get a national operating licence in order to establish its presence across the country. It also emerged that the bank has grown its assets base to N34 billion as at the end of its 2013 financial year. This represented an increase of 141 per cent compared to the N14 billion recorded in 2012. The bank hopes to acquire the National Operating License before the end of the third quarter, to enable it operate in all the 36 states of the federation. Chairman of the bank, Alhaji Umaru Abdul Mutallab, said that in no distant future, the company would be listed on the Nigerian Stock Exchange.

The Ghana Islamic Microfinance, the first Shariah-compliant financial institution in Ghana, is to receive the Women’s For Development Award 2014 from the Islamic Development Bank. The award will be presented to the financial institution at an event of the Board of Directors of the Islamic Development Bank, taking place in Jeddah, Saudi Arabia from June 22 – June 26. Ms Suwaiba Mohammed Amin, the Programmes Manager of Ghana Islamic Micro-finance said the aim of the financial institution is not to bring Shariah law to Ghana but to use its principles to promote ethical financing and fight against the exploitative loans currently going on in the country.

Jaiz foundation, the corporate social responsibility (CSR) arm of Jaiz Bank, has donated relief materials worth N10 million to victims of Boko Haram insurgency in Borno state. The items donated included 200 bags of grains, 1,600 pieces of clothing materials for both men and women, 660 gallons of groundnut oil, among others. Borno state governor, Alhaji Kashim Shettima, assured that the materials will be distributed to victims of Boko Haram insurgency, especially during the Ramadan. Shettima assured of the state government's readiness to continue to identify with the bank and called on other institutions and corporate bodies to emulate Jaiz and Dangote foundations.

The Gulf Bond and Sukuk Association (GBSA) held a seminar on Islamic finance in Dakar, Senegal last week at the Making Finance Work for Africa (MFW4A) Partnership Forum. The seminar covered key concepts in Islamic finance as well as current trends in the Sukuk market and the use of Shari’ah-compliant financing as a development tool. GBSA President Michael Grifferty said it has to be ensured that African companies and sovereigns are aware of all financing options available along with the respective risks and rewards.

The Islamic Development Bank has launched a programme to release $180 million in financing to six African countries for renewable energy projects. The new initiative, called Renewable Energy for Poverty Reduction, will target projects over the next three years to improve access to electricity in Africa's rural areas. Around $125 million have been committed by the bank and initial talks with potential partners such as the OPEC Fund for International Development have started to secure the rest. The initiative will focus on West Africa and projects in Burkina Faso have already been approved. Projects such as mini-grids and rooftop solar systems for Mali, Senegal, Niger and Nigeria are likely to follow and a sixth African country not yet determined.

The Islamic Development Bank has launched a programme to loan $180 million to six African countries for the purpose of renewable energy projects. Islamic finance is growing in Africa and mainly used by governments that want to develop infrastructure projects on a large scale. Saudi Arabia-based IDB promotes economic development in 56 countries through Shariah-compliant loans and grants. Just about half of the bank's member countries are in Africa. The continent is home to hundreds of millions of Muslims.