Islamic finance has big potential in North Africa – S&P

By bne IntelliNews February 18, 2014

With total assets estimated at nearly USD 1.4tn, Islamic finance could develop in North Africa where large current account deficits and retreating conventional financing sources have driven regional governments to tap opportunities offered by Islamic finance, Standard & Poor’s said in a report.

"Sharia-compliant banking previously presented an attractiveness that was at best exotic for regulators and banks active in these markets. Now, the perception is changing and public awareness is increasing," S&P underscored.

Such parameters are being observed in Egypt, Tunisia, and Morocco, according to S&P. The latter countries have recently taken steps to implement policies supporting the development of Islamic finance.

Tunisia plans to issue sukuk (Islamic bond) to lure new class of investors, while Egypt introduced new regulatory frameworks for sukuk issuance, S&P said. Morocco is also laying the legal foundation for Islamic banks, it added.

Islamic finance in North Africa, however, has yet to prove its economic added value beyond enabling products abiding with Islamic law, S&P said. Such added value could materialiсe by providing access to a new class of investors or by offering Sharia-compliant products at costs comparable with their conventional counterparts, the ratings agency noted.

Islamic finance can be suitable for infrastructure and project finance, as banks lack long-term funding capacity required by these projects, S&P said.

“Several projects in renewable energy, transport infrastructure, and communication are ongoing or expected to be launched in the future in North African countries. Using sukuk to finance some of these projects could help diversify investor bases and tap additional pools of resources,” S&P concluded. 

Related Articles

Trump warns US pullout from "horrible" Iran nuclear deal might still be ahead

US President Donald Trump on October 16 warned that the termination of the Iran nuclear deal is still a clear possibility even though he ... more

Pentagon chief suggests staying in Iran nuclear deal is in US interests

US Defence Secretary Jim Mattis on October 3 told the Senate Armed Services Committee that it currently appears to be in the strategic interest of Washington to remain in the Iran nuclear deal. ... more

Iran will in six years accept stricter nuclear inspections if US behaves, says foreign minister

Iran’s foreign minister has said the country is willing to formally accept a tougher nuclear inspection regime in six years. However, Mohammad Javad Zarif continued to rule out any renegotiation of ... more