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Monday, 14 October 2013

Africa Is Seeing an Explosion In Banks Looking To Cash In On Continent's Growing Muslim Population

Islamic banking is set to expand dramatically in Africa over the next two decades as the number of Muslims on the continent grows from 240 million to an estimated 400 million.
In Nigeria, for example, 80 million people are Muslim, but the first totally committed Islamic bank, Jaiz Bank, just opened in 2012 -- and has already expanded to 10 branches. Meanwhile, other banks have offered Islamic products to help customers maintain Islamic law, also known as Shariah, Euromoney said this week. By contrast, the U.S. opened its first stand-alone Islamic bank -- Lariba, based in Whittier, Calif. -- in 1987 despite having a far smaller population of Muslims.
Unlike conventional Western-style banking, Islamic banking operates according to the principles of Shariah, prohibiting the fixed or floating payment or acceptance of specific interest or fees for loans of money. In addition, Islamic banks that strictly follow Shariah do not invest in businesses that provide services or products that are considered sinful or prohibited.
Shariah banking offers an opportunity for Africa's existing banks. In Kenya, the Gulf African Bank experienced triple-digit growth last year, around 154 percent in net profit, after adding Islamic banking products. The First Community Bank grew by 238 percent. And because of this exceptional year-on-year growth, Standard Chartered PLC (LON:STAN) said it would soon start offering Islamic banking products in Kenya.
As African banks embrace Islamic practices, regulatory bodies are scrambling to issue Shariah-compliant policy statements and rules. In March, Nigeria brought in new guidelines to help deal with sukuk – the Islamic equivalent of bonds. A month later, guidelines were established to deal with takaful, Islamic insurance.
Kenya’s successes in the Islamic banking industry reflects the fact that the nation has since 2011 been making regulatory changes and working on some of the more complex Shariah products, such as real estate investment trusts.
South Africa, Africa’s biggest economy and home to about 750,000 Muslims, has rewritten its tax laws to ensure that Shariah-compliant products are more transparent.
Uganda, Botswana and Zambia are also looking to make regulatory changes to grow their Islamic banking sectors.
(International Business Times / 26 Sept 2013)
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Malaysia, UAE Tie Up To Boost Economic Ties, Islamic Finance

The central banks of Malaysia and the United Arab Emirates signed a pact on Friday to foster closer economic ties between the two countries, including in the area of Islamic finance.

The pact signals stronger cooperation between the two financial hubs, which held a combined $181 billion in sharia-compliant banking assets as of 2011, despite growing competition for a share of Islamic business.

Governors of both central banks signed the memorandum of understanding on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington.

It follows stronger cooperation between the Islamic finance centres, in particular the Gulf and Southeast Asian regions, despite traditional differences in the design and implementation of sharia-compliant financial products.

Both central banks are key backers of the Malaysia-based International Islamic Liquidity Management Corp, an institution tasked with addressing a shortage of interbank lending products for Islamic banks.

Last year, Malaysia’s securities commission revised its guidelines for screening equities that qualify for Islamic investment, moving them closer to the approach used in the Gulf.

The global Islamic banking industry is expected to tip $1.3 trillion by year-end. It follows religious principles such as a ban on interest and pure monetary speculation.

(Gulf Business / 14 Oct 2013)

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