Countries in East Africa, those lining the Red Sea coast and those further south, are increasingly joining the Islamic finance industry as their Muslim population grows and demand for Shariah-compliant banking and finance rises. This development is closely watched by Gulf Co-operation Council nations since it could open interesting new business opportunities.
After all, the countries of East Africa and the Gulf share close geographical, historical, cultural and political links, and a strong Islamic finance sector on both sides of the Red Sea could provide African companies with significant opportunities to access the Gulf’s financial power, and Gulf States with a plethora of Shariah-compliant investment opportunities in prospering East Africa.
Apart from Sudan, where Islamic finance is already well-established and its roots go back to the 1970s, and Djibouti, which has built up a small, but vital Islamic finance sector over the past two decades, Shariah-compliant banking is increasingly being adopted and developed in Egypt, which is working on a regulatory framework to encourage the launch of more Islamic banks from currently only three.
In Ethiopia, which back in March this year got its first-ever Muslim national leader, the central bank is planning to develop Islamic finance in order to improve financial inclusion, while Somalia’s central bank, re-established in 2009, has since given licences to six Islamic Banks and two takaful companies. Both Tanzania and Kenya have recognised the huge potential of Islamic finance in their respective countries and unveiled a package of initiatives to develop the industry.—Agencies