IslamicFinance.de

Ethiopia's central bank aims to develop Islamic finance to help expand financial access and inclusion. The country has one of the highest economic growth rates in Africa, but relies heavily on an agricultural sector that employs three-quarters of the workforce. According to Getahun Nana, Vice Governor of the National Bank of Ethiopia, the government wants to industrialize its economy but this requires sustaining investment rates of almost 40% of GDP over the next five years. Islamic finance could help in this endeavor, so the central bank is conducting a study to determine the demand for sharia compliant financial products. Islamic finance is still new in Ethiopia. Currently 8 out of 18 financial institutions offer sharia compliant products via Islamic windows but they have so far mobilized less than 1% of total deposits.

The perceived sustainability and attractiveness of Islamic finance as an alternative financial management model in a post global financial crisis continues to flourish in new regions and countries trying to change banking regulations and laws to facilitate the introduction of such institutions and products in their respective jurisdictions.
The latest region which is trying to open up to Islamic finance is East Africa, including Ethiopia, where local reports suggest that the National Bank of Ethiopia (NBE), the central bank, is in the process of finalizing a banking regulation and business directive that would allow the authorization of a bank operating under interest-free (Islamic finance) principles.
At the same time the government of Kenya is studying the possibility of issuing the country's debut sovereign sukuk issuance, while the First Community Bank (FCB), Kenya's second Islamic bank, has launched FCB Capital, which plans to issue a series of local currency sukuk plus other Islamic capital market products for a growing market segment.

Finally responding to a strong public demand, the National Bank of Ethiopia (NBE) is about to approve a directive that paves the way for the establishment of Islamic banks. The directive also opens doors for currently operational commercial banks to create an interest-free banking wing. To accommodate muslims, who are by Sharia’h – Islamic law – prohibited from taking or giving interest, commercial banks are currently offering zero interest. However, the sector will, according to Prime Minister Meles Zenawi, remain closed from foreign banks involvement. After the establishment of the first private commercial bank in Dubai, more than fifty interest-free banks were established in Muslim countries and as well as in European countries such as Denmark, Luxembourg, Switzerland and the UK.