IslamicFinance.de

Djibouti expects to see new entrants in its Islamic finance sector and the government plans to work on a framework to allow the use of Sukuk, or Islamic bonds, to fund infrastructure projects, its central bank governor said.
Djibouti, a country of less than a million people located on the Horn of Africa, is a relative newcomer to Islamic finance, having introduced sector-specific legislation in 2011, but authorities hope it can increase banking penetration in rural areas while also attracting foreign investment.
The government has established a national Sharia board to help oversee the sector, appointing five members to the independent body last week, central bank governor Ahmed Osman said in an interview.
The move could help Islamic finance by improving consumer perception of the industry and providing greater clarity on contracts which follow religious principles such as bans on interest and gambling. The government is in discussions with the Saudi-based Islamic Development Bank to secure a technical mission to help establish a framework to issue sukuk.

Djibouti plans to work on a framework to allow the use of sukuk to fund infrastructure projects. Djibouti is a relative newcomer to Islamic finance, having introduced sector-specific legislation in 2011. Central bank governor Ahmed Osman said the government has established a national sharia board to help oversee the sector, appointing five members to the independent body. The government is in discussions with the Saudi-based Islamic Development Bank to help establish a framework to issue sukuk for either the government or state-owned enterprises. The central bank is also in discussions with two lenders seeking to open Islamic windows. Currently three of Djibouti's 10 banks are Islamic: Saba Islamic Bank, Salaam African Bank and East Africa Bank.

Djibouti is promoting Islamic finance to increase banking penetration in the tiny African nation and help fund upgrades to the country's infrastructure. Since most people are still not customers of banks, Djibouti sees sharia-compliant finance as a way to pull itself out of poverty and to assemble capital for investment. Central bank governor Ahmed Osman said banking penetration had risen from 10 percent of the population six years ago to 17 or 18 percent now, but that conventional banks were not attractive to many people for religious reasons. The spread of Islamic banking will also help authorities move more business activity from the informal economy to the formal sector.