Djibouti: Islamic finance to capture growth opportunities in Africa

The inaugural Islamic Banking Summit Africa (IBSA), which opened today at the Djibouti Palace Kempinski, Djibouti, saw more than 200 leaders in the international Islamic banking and finance industry engage in critical discussions that focused on 'capturing the Africa opportunity in Islamic finance'.

(Ahlul Bayt News Agency) - The two day event, held under the official support of the Central Bank of Djibouti, kicked off today with an inaugural keynote session which featured a special presidential address by Ismail Omar Guelleh, President of the Republic of Djibouti and Head of Government and a keynote address by Djama M. Haid, Governor of the Central Bank of Djibouti.

The opening keynote session also featured Khaled Mohammed Al-Aboodi, Chief Executive Officer and General Manager of the Islamic Corporation for the Development of the Private Sector, the private sector arm of the Islamic Development Bank Group (IDB), Saudi Arabia and Jaseem Ahmed, Secretary-General of the Islamic Financial Services Board (IFSB) who discussed how Islamic finance can act as a catalyst for a new wave of economic development in Africa and how Islamic finance can mobilize trade and investment flows into Africa.

A key highlight of IBSA 2012 was the high profile Power Debate session led by internationally respected CEOs and industry leaders. Moderated by Etsuaki Yoshida, Director and Senior Economist at Japan Bank for International Cooperation (JBIC), the session analyzed the key challenges to be overcome to achieve significant growth in the Islamic banking and finance industry in Africa. The power debate featured Dr. Suleiman Walhad, Chief Executive Officer of Dahabshil Bank International; Asad Aziz Ahmed, Managing Director of Gulf African Bank; Basel A. Haj-Issa, Chief Executive Officer of Saba Islamic Bank; Omar Ibrahim Egal, Chairman of Salaam African Bank; Cassim Docrat, Director of DDCAP (DIFC) Limited and Ali Mohamed, Head of Shariah at QInvest.

Commenting on the opportunity and challenges for Islamic finance in Africa, Dr. Suleiman Walhad, Chief Executive Officer of Dahabshil Bank International said that "Africa has a population climbing to some 1 billion people and a substantial number of the continent's citizens are Muslims.
 
This large population needs to be served and it is on the onus of Islamic finance institutions and industry leaders to bring Islamic financial services to the continent and its large Muslim population.

So far, as we note, other than the Northern part of the continent, which is a natural franchise of the industry, the rest of the continent needs to be explored by the Islamic banking industry leaders and financial institutions much as they would market their products and services in any other part of the world.
 
In addition to this many African corporations, companies and governments, ask themselves day in day out on how to raise capital for business ventures, infrastructure development and other funding requirements that they frequently need, to help their respective countries and corporations rise up from the poverty that the continent is almost synonymous with, despite its vast rich natural resources. Islamic finance can be an answer to this."

He also said that "the Arab countries, Asia, Europe and the Americas have witnessed the growth of Islamic banking and finance through the various delivery mechanisms of the industry namely Islamic financial institutions (banks, leasing and insurance companies, multi-lateral institutions that regulate the industry such as AAOIFI, IIFB, IIRA and IIFM and academic institutions and others) and the key conferences that deal with the multi-faceted aspects of the Islamic financial industry.

Africa did not have this kind of opportunity and especially this region of the continent as much as those in other parts of the world."

"We hope events such as the Islamic Banking Summit Africa (IBSA 2012) would help the continent get exposed to the nascent and growing Islamic financial industry", he added.

A similar view was expressed by Asad A. Ahmed, Managing Director of Gulf African Bank who observed that "the Islamic finance industry is still in its infancy across Sub Saharan Africa. However, the pace of development is rapidly increasing given the growing appetite for Islamic finance and the enabling regulatory environment being created in key markets.
 
Strong economic growth in the continent, coupled with human resource development, and promotion of private sector growth is expected to boost economic activity in the region which, in turn, will increase demand for more inclusive banking services.
 
The presence of a large unbanked Muslim population, as well as Muslims who would prefer a choice aligned to their faith, offers a tremendous potential for the growth of the Islamic banking and finance industry in the African markets. The Islamic Banking Summit Africa is an important initiative which undoubtedly provides a dynamic platform to discuss the way forward for the African Islamic banking and finance industry and Gulf African Bank is delighted to be supporting this important event."

Speaking to the media present at the event, David McLean, Chief Executive of the Islamic Banking Summit Africa (IBSA) noted that "Africa is becoming an increasingly attractive destination for investments that are Shari'ah 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. However, the Islamic finance industry is still in its infancy on the continent. Of the total 600+ Islamic financial institutions worldwide, only about 40-50 are operating on the African continent, which is home to a massive Muslim demographic that represents over 50% of the total population.
 
Recent reports indicate that over 65% of the total population in the continent are unbanked and that banking penetration stands at 60% in urban areas and less that 20% in the rural areas. This indicates a promising future for Islamic finance in Africa.

However to tap into the tremendous potential the regional industry must overcome certain challenges which include lack of Shari'ah compliant investment vehicles, fragile legal and regulatory frameworks and most importantly the lack of awareness by the majority of consumers."

The Islamic Banking Summit Africa (IBSA 2012) continues on to the 7th of November 2012.

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