Amman: Islamonline.com quoted experts saying that the way to give Egypt’s Islamic finance sector “a big boost” would be via new banking licenses and by offering tax incentives to institutions managing Islamic funds.
The Muslim Brotherhood government in the post-revolution nation aims to boost the Shariah-compliant share of total banking assets from 5 to 35 percent within five years, said the report. Thus there is a huge potential for development in that sector.
Though former President Hosni Mubarak did not oppose Islamic finance, nothing was done to encourage it either and initiatives had to contend with damaged credibility as a result several investment scams in the 1990s and reduced demand as a result of fatwas that permitted interest-based dealings. It was mentioned that only 10% of Egypt’s banks are fully certified Islamic institutions.
While is was suggested that the Egyptian government stands to gain from developing Islamic finance and meeting it ambitious target, it does face significant challenges. New regulatory structures would be needed and the proposed incentives would require significant capital that the government currently does not have. Added to that, the traditional banking sector is doing well, so it may be tough to get the religiously motivated reforms implemented.
The report also mentioned that in other nations where Islamic banking coexists with traditional banks its growth has been a gradual process such as in the Gulf where Islamic banking assets account for about 25 percent of the banking assets, according to Ernst and Young. Similarly it took Malaysia, now the world’s biggest market for Islamic bonds, about six years along with structural changes to achieve its current 22 percent share, according to the International Monetary Fund.
Yet still Egypt has faced and overcome great challenges, just in the past three years, and has achieved what has taken other nations decades. Perhaps the next stage of the revolution will be in the banking sector. Only time will tell.