THE PROSPECTS FOR ISLAMIC FINANCE IN AFRICA LOOK INCREASINGLY PROMISING
On an international scale the Islamic finance industry has experienced tremendous growth. The compound annual growth (CAGR) of the industry between 2009 and 2014 was 17.3% and the industry’s assets recently surpassed the USD 2.1 trillion mark - with experts forecasting that by 2020 these will increase to USD 6.5 trillion.
As of now, Africa has only around 2% of global Islamic banking assets and as little as 0.5% of Sukuk outstanding and, notwithstanding ongoing turbulence in the global economy, the stage is set for the rapid growth of Islamic banking and finance across Africa. In addition, Africa’s strong potential for rapid growth in retail banking has also drawn several international Islamic banks to invest on the continent.
Africa is home to over a quarter of the global Muslim population and has an increasingly strong and viable market for Islamic financial services and products. While the industry is still in a key development phase, tremendous progress has already been achieved on the continent, with potential for exciting growth across key markets especially in East Africa. Islamic finance is being increasingly deployed as a strategic instrument to tap into the unbanked population in Africa and innovatively address the vital issue of financial inclusion, as well as becoming a catalyst for boosting FDI and trade flows between the continent and OIC markets. Furthermore, Sukuk is well positioned to play a powerful role in meeting the funding gaps in strategically vital infrastructure projects across the region.
The population growth, improved consumer spending power and the significant part Islam plays in Africa’s demographic outlook, mean that Islamic finance will increasingly play a significant role in the economics of the continent. The need for a broader access to financial services as well as the urgent requirements for infrastructure financing provide the perfect opportunity for Islamic finance to grow. For the Islamic finance industry to develop and thrive there is, however, much work still to be done on the continent, especially in areas such as the regulatory and supervisory framework.