Shari’ah-compliant banking is a recent phenomenon in
Conservatively assuming that banking entrenchment in Africa represents an average 50% of the total GDP produced by African Muslims, the Islamic finance market on the continent is potentially worth close to USD 235 bln, Moody’s Investors Service said in its special comment entitled “Islamic Finance Explores New Horizons in
Modern Islamic finance originated in the mid-1970s, and for three decades remained focused on two core markets — the Middle East (and especially the wealthy oil-exporting Gulf countries) and Southeast Asia (with Malaysia being by far the unchallenged leader in this industry).
Moody’s noted that the expansion of Islamic banking and finance has accelerated in recent years, with the industry diversifying out of pure lending into new business lines and new territories beyond the natural borders of the Muslim world.
Initiatives on Shari’ah-compliant investment and financing are mushrooming across the board, with countries as economically significant as
“Average per capita GDP on the continent was a low USD1,137 in 2007, but given the fact that Africa is host to the second-largest Muslim population in the world, the absolute size of its economic production reached USD 469 bln last year,” said Anouar Hassoune, a Moody’s analyst and author of the report. “This is not insignificant, as it is on par with the combined GDP of Saudi Arabia and the
In Moody’s view, the potential value of the Islamic banking and finance market in
“Provided that the continent continues to grow at its current pace, which is the fastest in decades, incremental wealth creation will make it easier for the Islamic financial services sector, including Islamic commercial banking but also Shari’ah-compliant insurance, investment and microfinance, to develop,” said Hassoune.
In the report, Moody’s summarises the key trends driving the increasing emergence of Islamic finance in each of the three sub-regions of the continent — namely North Africa, sub-Saharan Africa and
In addition, given its very special status within the African Islamic finance landscape, a specific focus is made on
In particular, Sukuk may be viewed as a powerful tool for African sovereigns — but also corporates at a later stage — to tap current Islamic liquidity, which has reached historical highs.