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Monday, 22 October 2012

Does Islamic finance have a responsibility to reduce unemployment

There is a buzz about the prospects for Islamic finance in parts of the Middle East and North Africa region (MENA). News reports are suggesting that as a consequence of change in public policy, the market share of Islamic banking in Egypt will grow to “35 per cent in five years from 5 per cent now”. Much attention in Islamic finance circles is also falling on the relatively smaller markets, such as Oman and Morocco. Observers, such as researchers from Credit Suisse, are also pointing to Islamic finance as a potential source of spurring economic growth in the Arab Spring countries.
A question arising out of all this buzz is this: Will the rise of Islamic finance address the problem of high unemployment among the Arab youth?
The economic literature on MENA tends to see unemployment as the region’s greatest challenge. It is difficult to exaggerate its scale and socio-economic implications. According to Global Employment Trends 2011 by the International Labour Organisational youth unemployment in the MENA region is estimated to be 24.8 per cent compared to world average of 12.6 per cent.
It is frequently argued that job growth in MENA is best expected from high-growth small and medium sized enterprises (SMEs). According to research by the World Bank, these SMEs consider limited access to finance to be a significant constraint. The buzz about Islamic finance in building expectations that it could help tackle unemployment in MENA by doing things like financing the under-financed SMEs that will create jobs.
(Gulfnews.Com / 22 Oct 2012)

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