IFIF 2016 to address regulatory challenges to accelerate development of Islamic Finance in Africa

By Our Reporter

The upcoming 2nd International Forum on Islamic Finance (IFIF 2016) is slated for the 9th and 10th of February 2016 at the Rotana Al Salam in Khartoum Sudan. It will serve as a key platform for critical discussions on developing effective regulation and supervision of Islamic finance in Africa. This is widely considered an indispensable event to help Islamic finance flourish in Africa and put it on a level playing field with conventional finance.

African countries harbor nearly a quarter of the world’s Muslim population and currently are at different stages in relation to the development of a legal and regulatory framework enabling Islamic banking practices, products and institutions. Sudan the host, is one of only two countries in the world whose banking system is wholly Sharia compliant.

In September 2015, the Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the Islamic Development Bank Group (IDB) signed an agreement with the Regional Financial Market Regulatory Body of the Western African Economic and Monetary Union (WAEMU). The partnership is aimed at mobilizing long-term resources of Union member states and the private sector, especially small and medium sized enterprises (SMEs). One of the key areas of cooperation includes information exchange that would help develop the regulatory framework to help Islamic finance flourish in West Africa.

A report from the ICD in September 2015, entitled ‘Islamic Finance in Africa: A Promising Future’ highlighted the tremendous growth opportunities for Islamic finance in Africa. Regulatory challenges identified in the report include regulatory inconsistency, the lack of awareness and financial literacy by many end-users and consumers, the shortage of qualified human capital and the need for a business landscape supporting the growth of Islamic finance.

A majority of African countries have dual banking system with distinct regulations for Islamic banking. Some of the countries that issued sukuk in 2015 include Gambia (US$ 230 million), Sudan (US$ 70 million), Senegal (US$ 210 million), Nigeria (US$ 700 million) and South Africa (US$ 500 million). At the same time, several countries such as Tunisia, Egypt and Morocco have announced their interest in tapping the sukuk market for infrastructure financing and are finalizing their legal frameworks to promote sukuk issuances.

Africa has much work ahead of it to be at par with more developed Islamic finance jurisdictions such as Bahrain and Malaysia. There is a key opportunity at IFIF 2016 in February for discussions on best practices to help level the playing field in Africa at the continent and at the global level.