Islamic Finance in AfricaProspects and Challenges

MIA / Afkar Consulting

IIBI, BBA London11th January 2012

Africa – Muslim Population

� Total Population of Africa� Total Population of Africa

�Variously Estimated at 900 – 1,000 million

� Muslim Population 50 - 60%

�Muslims in Africa 500 – 600 million

�Africa – A Muslim Majority Continent

Africa – Countries with Largest Muslim Populations

� Nigeria – 91 million

� Egypt – 74 million� Egypt – 74 million

� Ethiopia – 53 million

� Algeria – 34 million

� Morocco – 31 million

� Sudan – 22 million

� Tanzania – 22 million

� Mali – 15 million

Africa – Relief and Drainage

Africa – Deserts and Forests

Africa - Internet Connectivity

Africa – Internet Backbone

Africa – Key Features

� Mostly Rural Population

�Rural 60%+ / Urban 40% -

� Key Occupations� Key Occupations

�Agriculture and Animal Husbandry

� Key Exports

�Commodities

�Oil

�Minerals

Africa – Key Features

� Average GDP / Capita < US$1,000

� Banked Population 20 – 30 %

�Urban 40% +�Urban 40% +

�Rural 10% -

� Banking Facilities

�1 Bank per 100,000 people

� Capital Markets

�Few and Rudimentary

Banking the Unbanked

Africa – New Vistas

� Entry of International Law Firms

�Morocco

�Egypt

�South Africa

� Entry of International Banks

�Barclays (Absa)

�Stanchart / Standard Chartered Bank

�Standard Bank / Stanbic Bank

�Ethnic Banks

�GCC Banks

Africa – Islamic Finance

Egypt Algeria

Tunisia Sudan

Morocco Senegal

Kenya Nigeria

Tanzania Uganda

Gambia South Africa

Africa - Challenges� Large Infrastructure Needs

� Large unbanked population

� Dominant Financing Requirements� Dominant Financing Requirements

�Agricultural Finance

�Commodity Finance

�Export Finance

�Microfinance

Africa -Innovations [1]

� Delivery Methods

� Overcoming Handicaps� Overcoming Handicaps

� Use of Mobile Phone Technology

� Kenya and M-Pesa

� Other Options

Africa Innovations [2]

� Islamic Finance – Back to Roots

� African Food Production Potential

� Salaam [Spot Sale / Deferred Delivery]� Salaam [Spot Sale / Deferred Delivery]

� Arbun [Deferred Delivery]

� Modarabah [Risk Sharing Contract]

� Original Agricultural Contracts

� Easy to Adapt to African Requirements

� Micro-Takaful Needs

Africa Innovations [3]

� The Desertec Project

� Use of Massive Deserts for Solar Power� Use of Massive Deserts for Solar Power

� Long Term Sukuk Possibility

� Institutional Funding of Social Entitlements

� Sustainable Energy Generation

Opportunities

� Potential Market Size

� Agricultural Finance

� Microfinance� Microfinance

� Microtakaful

� Risk-Sharing Infrastructure Finance

� Sustainable Finance

� Ethical Finance

Africa – Other Players

� World Bank Group

� IDA

� IBRD

� IFC� IFC

� Multilateral Development Banks

� ADB

� ISDB

� Bilateral Development Aid / Resource Seekers

� OECD

� China

� India

� Predatory Food / Land Seekers

Can Islamic Finance Deliver?

� Present Islamic Finance

�Mostly Delivering to Urban Middle Class

�Mostly for Urban Needs�Mostly for Urban Needs

�Little Agricultural Lending

�Little Microfinance

�Negligible Micro-Takaful

�Negligible Use of Innovative Technology

� Need for Change of Focus / Emphasis

Contact:

M Iqbal AsariaM Iqbal Asaria

Afkar Consulting Ltd

0208 861 2012

mia@afkar.com