African Islamic finance faces an image problem
Posted Thursday, May 6 2010 at 00:00
Africa’s Islamic finance industry needs to overcome negative perceptions among non-Muslims to successfully expand into predominantly Christian sub-Saharan Africa, an industry leader said on Tuesday.
Northern Africa is largely Muslim and countries such as Egypt and Sudan have offered Islamic banking for decades.
Now some lenders are looking to expand into sub-Saharan nations, such as Uganda which is 80 per cent Christian.
Islamic finance caters for customers who want to avoid earning interest, which is viewed as usury under Islamic law.
Islam also prohibits speculation and investment in non sharia-compliant industries.
Islamic banking operates on a small scale in a few sub-Saharan countries, such as Kenya, South Africa, Botswana and Nigeria.
Industry participants say Tanzania, Malawi, Uganda and Zambia would be next. Each have minority Muslim populations.
“The biggest challenge we face is the perception that this is a bank only for Muslims, which is not correct,” said Suleiman Shahbal, chairman of Gulf African Bank, which was launched in 2008 and is one of Kenya’s two Islamic banks.
“This is a business and frankly we are indifferent to whether you are Muslim, Christian, Hindu, a non-believer or whatever,” Shahbal said, who added that Islamic banking institutions were still accused of hiding political agendas. “Some people are extremely hostile and they see a political agenda in Islamic banking. It is not political at all, we have no political agenda ... Some even think we support al Qaeda, which is of course complete nonsense,” Shahbal said.
The Islamic finance industry is eager to grow outside its main centres in the Gulf Arab region and South East Asia.
Ebrahim Ahmed Patel, chief of South Africa’s FNB and WesBank Islamic Finance, told a Nairobi conference the Islamic finance market in Africa is potentially worth $235 billion.
Experts say national regulatory bodies need to be open to facilitating an alternative system of banking.
Kenya has made adjustments to its banking laws which allowed the emergence of Islamic finance in the east Africa.
Meanwhile, South Africa’s Standard Bank Group has launched its first Islamic banking product in Tanzania and is awaiting regulatory approval to offer similar services in Nigeria, a senior executive said.
The sharia law-compliant savings and current accounts are aimed at attracting customers deterred by conventional banking which conflicted with their faith, said Terry Moodley, head of personal and business banking at Standard Bank.