Consistent with the global focus on Africa, which is expected to become the next growth story after the phenomenal growth in Asia, the continent is becoming an increasingly attractive destination for Shari’a-compliant foreign direct investments. It has grown to be the third fastest growing region in the world after Middle East and Asia. Further increase in trading between Africa the Middle East and Asia is expected to boost IBF in the region.
The lack of financial sophistication and a lower level of economic development also helped Africa to remain insulated from the recent global financial crisis of 2008/2009. Thus when the whole world was trying to recover from the global financial crisis, a number of African governments were introducing reforms for economic acceleration, and devising new growth strategies. Financial services companies are playing a key role in this transformation.
Islam in Africa accounts for almost 35% of the continent. It is the fastest growing religion and the Muslims population in this continent is expected to grow from 240 million to 400 million in the next two decades. In recent years, a number of conventional banks, both local and international, have set up their Islamic franchises in Africa. Barclays, for example, bought local banks in Africa – Absa Bank in South Africa and Nile Bank in Uganda. Both banks are involved in IBF. In Kenya, Gulf African Bank experienced triple digit growth in 2012 with 154% in net profit after adding Islamic financial products in its product offerings.
Following these success stories in African Islamic banking sector, other countries like Botswana, Zambia and Senegal are also seriously looking into developing IBF in their respective markets. A number of GCC-based IBFIs have started their African expansion strategies, and it is expected in the coming years that IBF will see a new phase of development in these countries through acquisitions by IBFIs in the Gulf region.
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