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GLOBAL: As
a region that has constantly showed significant interest in Islamic
finance, Africa has now been projected to deliver its full potential over
the medium-term. In a joint research report recently released by the
Malaysia International Islamic Financial Center (MIFC) and KFH Research,
the continent is expected to witness an increase in Shariah compliant
activities on the back of rising infrastructure and economic development.
The driving factors that have been identified for the African region
include economic growth supported by stronger regional integration;
Africa’s demographics whereby the middle class population is expected to
increase thus boosting the demand for retail banking, Takaful and Islamic
funds; an infrastructure funding gap of US$31 billion in the medium-run,
particularly in the power sector; and increased awareness of Shariah
compliant products as well as the renewed interest of policymakers in the
sector as a means to support financial inclusion.
Another key growth driver for the region is the growing significance of
trade and investment relationships between Africa and key Islamic finance
jurisdictions. Trade volumes between Africa and the GCC countries are
expanding with GCC exports to Africa growing at an average of 14.7% a
year and imports increasing by an average of 27.5% between 2000-10; with
annual trade amounting to approximately US$35 billion. In 2011, Malaysia
was identified as the third-biggest investor in Africa with foreign
direct investment flows into Africa coming close to US$3.5 billion.
According to data provided by the MIFC and KFH Research, Africa accounted
for 2.4% of global Islamic banking assets as of the first half of 2013,
as well as 2.8% of Islamic fund management assets at the end of 2013, and
0.6% of total outstanding Sukuk as for the first quarter of this year.
Over the medium-term, Sukuk issuances, retail Islamic financial products
as well as Takaful schemes relating to healthcare and education are
expected to increase in correspondence with Africa’s social and economic
developments.
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