Zimbabwe is set to introduce Islamic banking, which has certain rules on profits and excess, as it seeks to attract its Muslim community, which says it wants to contribute to the country's economic revival.
Talks between the central bank, the Finance ministry and the Islamic community have started, with an official from the Muslim community, Ashirai Mawere saying their members are eager to boost the southern African country's economy through Islamic funds.
This comes as international Islamic finance sector is expected to be worth $2,6 trillion in four years.
More than 50 countries, including the United States of America, the United Kingdom, France, Japan, Singapore, Saudi Arabia, Germany, China and Malaysia have recognised Islamic banking and finance.
Mawere said Islamic banking will, among other things, help ease liquidity challenges in the country and boost Zimbabwe's status in the world of financial services.
A majority of people in Zimbabwe's Muslim community, estimated to be 1% of the country's 12 million population, do not use banks and are prone to robberies.
Islamic banking is based on the principles of Islamic law (Sharia).
Two basic principles behind such a banking system are the sharing of profit and loss and it prohibits the collection of interest, which is not permitted under Islamic law.
Once set up, the bank will not be exclusive and will be open to all irrespective of religion and caste.
"Muslims have a traceable record in the development of health and general science, education, sports, literature and economics and we need to participate in all this success," Mawere said.
Market experts believe that in order to tap the immense investment potential of the oil-rich Middle East, it was in Zimbabwe's interest to introduce Islamic banking.
Major international corporate banks such as Citigroup, HSBC, Deutsche Bank and Standard Chartered have Islamic banking windows.
Innocent Mugore an independent economist said it will provide the opportunity to bring a large section of the Muslim population into the mainstream.
"And if Zimbabwe were to introduce the system, the concept is likely to boost the economy of the country as well as the entire southern African region," he said.
Zimbabwe will for the first time host Orischart Islamic Expo to be held in Harare, between November Wednesday and Sunday.
Terrence Mhlope, one of the event organisers, said the Expo will firmly establish its position as a pre-eminent platform for leaders in the Islamic finance and investments industry in Zimbabwe to engage in discussions that provide a deeper insight into what the future holds for the Islamic banking and finance industry on the continent.
Mhlope noted that a key outcome of the discussions at last year's Islamic Finance Forum event was that Zimbabwe is becoming an increasingly attractive destination for investments that are Sharia compliant.
"Africa has now been re-positioned as the third fastest growing region in the world, after the Middle East and Asia.
"Over the last decade, trade between African countries and the rest of the world has grown significantly, with economic linkages with, the Middle East, in particular, strengthening further," he said.
The Islamic Expo comes after Sheikh Mohammed bin Saud bin Saqr Al Qasimi, Crown Prince of Ras Al Khaimah visited Zimbabwe early this year and explored possible investment opportunities in mining, engineering and agriculture.
The buzz that has gathered around Sharia-compliant finance — following Dubai’s plan to establish itself as the capital of the Islamic economy, and the UK’s announcement of a sovereign sukuk and extension of its task force to develop the sector — denotes not only a growth industry offering opportunity, but also the prospect of reformist change.
Inadvertently, though, it reminds us that many of the associated themes have remained unhelpfully unchanged. A certain status quo prevails in the calls for improved transparency, governance and standardisation across the industry and its competing centres and regions; similarly in the uncertainties and arguments about the scholastic dimension of what is otherwise a conversation between governments and markets, and comparative regimes.
The relevance of religion and academia brings a whole set of question marks into the discussion, and the need to pursue answers by the sharing of ideas with some degree of common objective.
As suggested last week, that dispersed dialogue remains very fragmented, not least in the varying voices from the Gulf and from its main rival and potential partner, Malaysia. It naturally appears that compromises have to be found.
Sometimes it takes a relative outsider to the main fray spontaneously to identify the friction and a means to resolve it, as was noticeably the case in London when governor of the central bank of Nigeria Sanusi Lamido Sanusi suggested from the podium: “I don’t think harmonisation is about a ‘one-size-fits-all’ policy. I think there are structures in place that have broken down some of the barriers that are mostly communication- and understanding-based. The conversation has to move [on]; we must get out of this mindset.”
It was a telling contribution, to the effect that, to hit its moving target, the Islamic finance sector needs to be customer-oriented, market-driven, and realistic. “As long as we accept a need for pragmatism and balanced rules,” he proposed, “we’ll find a way forward”.
Whether that kind of invocation can break circles of confusion and impasse depends on those who are really the leading insiders — the key players in the contest, from the Gulf and Malaysia especially — to agree on its validity. Time will tell.
Meanwhile, amidst all the noise attending the key debates, and the repetitive sound bites of those marketing for business, there are other nuggets of wisdom available among the printed declarations of sources in the know.
These observations, inevitably often couched in the regular speech patterns of those in positions of responsibility, can serve usefully to inform the paths ahead, if they can be sifted from the public relations agendas. Drilling down into the literature from the UK’s summit late last month unveils insights of that sort.
One example actually resonates beyond the confines of Islamic finance, even of broader ethical or socially-responsible finance, into not only conventional finance but what could be called conventional economics.
As president of the Islamic Development Bank Mohammad Ali Al Madani noted, “There has been growing realisation among policymakers as well as the general public that many of the past and present financial crises have their origins in excessive debt and the resultant de-link of finance from economic reality.”
Unfortunately, not only does much of the current rebound in the global economy seem to rely on the resumption of escalating household borrowing and consumption, but a substantial weight of policy advice seems to suggest that exercising such leverage in both monetary and fiscal terms is integral to growth and well-being.
That would seem to miscast the basis of prosperity as being in, succinctly, the “quantity of demand” rather than “quality of supply”, but also reflects the legacy of indebtedness already accumulated, that needs to be indulged and ever so gently worked out globally to avoid further disaster.
Another worthwhile note is that, from an investment perspective, again there is a potential commonality between Sharia-compliance and non-compliance, in terms of expectations. Realistically, Islamic institutions are not only in a competitive marketplace for funds in relation to depositors but also in delivering wealth creation to investors.
As author Nigel Gibson says, research indicates that, provided it is deemed compliant, few customers from Muslim countries “admit to having been influenced by the structure of a product or service”, but instead require, specifically in respect of insurance vehicles, “a decent return”. It is, arguably, probably as well to accept that notion.
Likewise, governor of the central bank of Malaysia Zeti Akhtar Aziz has been quoted as finding Islamic finance growing so much as a sustainable form of funding precisely because of its competitiveness.
Whether that claim can be borne out across the board may depend on the ability of the dealmakers to streamline the process of documentation and generally accepted Sharia board approval.
The latest signs are, as for the sector as a whole, that the spirit among practitioners and prevailing authorities is comparatively willing.
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