Islamic finance is not very common in West African countries, where ironically the population is largely Muslim. Nevertheless, an Islamic financial system may be what these countries are lacking as they seek to promote economic development in the region.
An Islamic financial system is a viable financing alternative for Africa because it is already in line with most of the African traditions, which are characterized by sharing, solidarity and mutual assistance. Besides the social and religious aspects, experts have endorsed this system’s viability because it eliminates speculation risks, which was the main cause of the global financial crisis that was experienced in 2008.
…experts have endorsed this system’s viability because it eliminates speculation risks, which was the main cause of the global financial crisis
For Islamic finance to be integrated into African development there is need to create fiscal incentives and new regulations that will promote the system. The African Islamic Finance Institute has already established several initiatives intended to develop the Islamic finance industry on the continent. Over the last five years, the institute has held three conferences in Senegal to specifically discuss issues of Islamic finance. They have also trained approximately 70 Islamic finance professionals.
The last conference was held on September 17 and 18 in Cote d’Ivoire, and was hosted by the Planning and Development Ministry of Cote d’Ivoire. The main topics discussed were: ways of promoting Islamic finance, particularly in Cote d’Ivoire and Africa in general; and the best methods required to mobilize the required tools for promoting Islamic finance.
Many speakers at the conference said that Islamic finance offers exceptional projections for the continent due to its low costs and unselfish appeal. Madani Tall, World Bank’s former director of operations in Cote d’Ivoire, said that Islamic finance is a funding alternative to conventional funding and it is very promising for the African continent.
Several African countries, including South Africa, Senegal and Niger have already issued $200 million, $500 million and$ 260 million sukuks respectively. A sukuk refers to a certificate that is used to pay dividends based on the returns gained from tangible assets. It is an Islamic bond- a traditional bond with no interest.
The Islamic Development Bank (IDB) has also pledged to increase its subsidiary funding to Africa from the current 13 percent to 30 percent over the next 5 years with the aim of promoting the Islamic finance sector.
Featured image: Fisherman Mosque, Dakar, Senegal