Since 2014, Islamic finance is expanding rapidly across Africa with $2.3 billion African sukuk, or Islamic bond, issuance, providing new funding sources for both sovereigns and financial institutions, a new report by Moody’s Investors Service released on Tuesday disclosed.According to the report, despite the growth, African sukuk make up just 0.5 percent of global sukuk.
“We have witnessed an increase in the number of licensed Islamic banks in recent years, though we estimate that Islamic banking assets still make up less than 5% of total African banking assets. We expect both sukuk issuance and Islamic banking assets to continue to grow quickly in Africa from a low base,” noted the report sent to APA.
Despite some structural constraints, Moody’s said it expected growth in sukuk issuance to be driven by increasing financing needs, especially for infrastructure projects and global investors’ growing comfort with the relatively complex legal structure of Islamic instruments.
Growth will also be pushed because of the desire within Africa for stronger investment links with fast-growing economies in the Gulf and Asia that have large Muslim populations with large pools of available capital.
“For Islamic banks, efforts by African governments to support Islamic banking in line with the cultural and religious affinity of their populations will support growth in this sector (we estimate that over 40% of the African population is Muslim),” noted the report.
According to the report, there are over 80 Islamic financial institutions in Africa, many of which have been licensed in the last five years.
The report further noted that eighteen African countries have the greatest potential for growth in sukuk issuance and/or Islamic banking.
They Include Egypt, Morocco, Tunisia, Algeria, Senegal, Nigeria, Niger, Mali, Gambia, Mauritania, Guinea, Togo, Ivory Coast, Sudan, Kenya, Djibouti, Somalia and South Africa.