Association for Free Research and International Cooperation

Is it possible to use african islamic finance for development?

For Muslims, Shari’ah is the guide for human conduct which encompasses every aspect of life –spiritual, individual, social, political, cultural, and economic. Shari’ah principles are the foundation for the practice of Islamic finance.

Islamic finance is a financial system that operates according to Islamic law (which is called sharia) andis, therefore, sharia-compliant. Just like conventional financial systems, Islamic finance features banks, capital markets, fund managers, investment firms,and insurance companies. However, these entities are governed both by Islamic law and the finance industry rules and regulations that apply to their conventional counterparts.

İn 2015 the total volume of Islamic financial institutions throughout the world is around $ 2 trillion. According to some economics analysts, Islamic finance market, is expected to increase its trade volume to 4 trillion dollars in 2020.[1]

Islamic finance system is very large transaction volumes in Malaysia, United Arab Emirates and Saudi Arabia can be listed as.

Home to over 1.2 billion population, Africa is currently the second most populous continent on earth and the total population is expected to double by the year 2050. On the other side, in fact 250 million population of Muslims are very important players in African financial market. Good example, trade in eastern Africa is largely under the control of local and Indian Muslims.


It is not a question of interest in Islamic finance, which is very different from the classical finance bank. In the classic finance model, a money holder gives to banks at a certain rate of guaranteed interest rates in a certain period. The bank gives the money a higher percent rate and the other needs as debt. It is not certain is investing with the credit received. Credit user, may have used a loan to pay off another debt.

In the Islamic finance model, the financial institution makes investments with deposits on behalf of the owner. It is not possible for these money to be used for debt .

For the western financial institutions and governments, the strategic importance of where Africans capital will be use. Interest in the African Islamic Finance market is not only limited to western financial institutions. Some developed Muslim countries have an interest in the African Islamic financial market too. Non-African strong players such as Saudi Arabia and the United Arab Emirates will have drawbacks to joining sub-Saharan Islamic Finance market for Africans.

We can simply explain the reason for this interest. First, for Western financial institutions, this formation can become a seriously lost market. This process can be expected to affect international financial institutions like İMF or World Bank.

Second, the importance of non-African Muslim countries in the market. It means the possibility to invest in a non-local financial structure with its African equity. For example, it could be thought that, the Saudi financial institution would take the capital of Tanzanian Muslims and make an investment with this money in Tanzania.

The problem here is not that Saud is the profit share the institution will receive, but that it can use this financial power for its own interests in Tanzanian politics.

On the other side, The Islamic financial system is not limited to the commercial activities of private banks only. In this regard, some African states already issue bonds called ‘sukuk’.


Sukuk is the Arabic name for financial certificates, also commonly referred to as “sharia compliant” bonds.

On the issue of Sukuk, especially Musharaka (Musharakah is a joint enterprise in which all the partners share the profit or loss of the joint venture), the method can be a good model for developing countries.

According to the State of the Global Islamic Economy Report 2016/17, of the $2.004 trillion of assets being managed in a sharia compliant manner in 2015, $342 billion were sukuk, being made up of 2,354 sukuk issues.[2]

While states such as Sudan and Gambia have issued Sukuk in the past, it was in 2014 that Senegal debuted the region’s largest Sukuk issuance (USD 208 million), with ICD acting as one of the lead arrangers. Following Senegal, South Africa became the third non-Muslim country after Hong Kong and the U.K to sell government debt that adheres to Shari‘ah law by issuing a USD 500 million 5.75-year Sukuk in September 2014. Looking to emulate Senegal and South Africa’s (Islam in South Africa is a minority religion, practiced, according to 2015 estimates, by roughly 1.5% of the total population) successful move into the Sukuk market, Cote d’Ivoire have since made inaugural debuts in 2015 of USD 260 million. ICD was involved as lead arranger in all of the sovereign issuances in Africa (except for South Africa’s Sukuk).

In June 2016, Senegal launched its second Sukuk issuance, valued at USD 350 million. Accordingly, the funds raised will be used to finance Senegal’s economic and social development projects, including the urban center of Diamniadio, a drinking water supply program, and a road and street lighting program. Togo issued its maiden Sukuk worth USD 277 million with a 10-year maturity with ICD’s support. This makes Togo the third state in the West African Economic and Monetary Union (WAEMU) to issue a Sukuk after Senegal and Cote d’Ivoire.

Following its five-year Sukuk program with ICD, Cote d’Ivoire issued its second sovereign Sukuk valued at USD 263 million in August 2016. [3]


Expensive electricity is one of Africa’s major problems. However, the power lines that are constantly deteriorating in Africa need to be renewed. African energy projects can be financed ‘by the local government controlled’ Sukuk system. In particular, the capital required for the construction of nuclear power plants capable of providing cheap and sustained energy can be provided in this way.

İf, the capital owners of the African continent, will invest İslamic financial system can give positive results for their countries. African businessmen shouldnt think İslamic finance just for  Muslims. African economists should think about İslamic African finance system for all African people.

On the other hand, the integration of the sukuk system into state-controlled cryptocurrency systems can benefit local governments. In this way, measures are taken against external financial manipulations. It should not be forgotten that all Africans money in American, British or French financial institutions will return to their governments as a debt.

The Islamic financial system, if managed by Africans, will remain an investment in their own countries, and their economies will rise.

AFRIC Editorial Article.

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