Islamic Banking Summit Africa, Djibouti Palace Kempinski
Islamic Capital Markets:
Connecting Africa to the World of Islamic Finance
Etsuaki Yoshida Director & Senior Economist, Japan Bank for International Cooperation Adjunct Research Fellow, Waseda University
4 November, 2014
Outline 1.
African Markets Today
2. Strengths and Challenges for Africa 3. Sukuk in Africa and the World 4. Economic Development and Islamic Finance
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1. African Markets Today
Islamic Finance in Africa
Around 1980’s
• Arab banks invested into several African countries such as Al Baraka Bank (Egypt, Sudan, Algeria, Tunisia, South Africa) and DMI Group (Egypt, Sudan, Senegal, Morocco)
2005 and after
• Both Private- and Government-driven growth • Take-off of Sukuk markets (and notably including sovereign sukuk) • Intra-regional growth
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Islamic Financial Institutions in Africa
Source: Speaker’s own
4
Muslims in Africa
Ranking by Muslim # (1st-30th) ムスリム人口 全人口比 国 ‘000 % （千人） ％ 000, %
Total Total - Africa
Muslim
Muslim (%)
1,032,319
437,786
42.4
North Africa
212,914
195,242
91.7
Sub-sahara Africa
819,405
242,544
29.6
Source: Pew Research Center 2011
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Nigeria Sudan Ethiopia Niger Tanzania Senegal Mali Burkina Faso Somalia Guinea Cote d'Ivoire Chad Mozambique Sierra Leone Uganda Ghana Cameroon Mauritania Kenya Benin Malawi Eritrea Gambia Congo, DR Djibouti Togo South Africa Guinea Bissau Comoros Liberia
75,728 30,855 28,721 15,627 13,450 12,333 12,316 9,600 9,231 8,693 7,960 6,404 5,340 4,171 4,060 3,906 3,598 3,338 2,868 2,259 2,011 1,909 1,669 969 853 827 737 705 679 523
47.9 71.4 33.8 98.3 29.9 95.9 92.4 58.9 98.6 84.2 36.9 55.7 22.8 71.5 12.0 16.1 18.0 99.2 7.0 24.5 12.8 36.5 95.3 1.4 97.0 12.2 1.5 42.8 98.3 12.8 5
2. Strengths and Challenges for Africa
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Factorizing Islamic Finance
Islamic Finance Muslims
Developed
nonMuslims
Emerging
7
Making factors into Matrix Developed
Emerging
Financial Mkts
Financial Mkts
Muslim
Core markets
Lands of potential Growth
Non-muslim
Advanced Fin Centers
Desert area
8
Classification of countries Financial Markets Development
High
Islamic Countries High
Islamic/ Muslim population Low
Non-Islamic with certain ratio of Muslim population
Non-Islamic Countries
Low
Highly (Relatively) Developed
Emerging
Malaysia, Bahrain, UAE & other GCC (ex.Oman) Brunei, Indonesia Turkey
Pakistan and South Asia Egypt, Sudan Other ME & CIS nations Some African nations
USA
(Singapore, France)
Thailand, Philippines India China
France, HK, (Latin American nations) Singapore, Luxembourg, Australia, South Africa, Korea U.K.
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Characteristics of Africa: Opportunities & Challenges
Opportunities
Challenges
Understanding on Islamic among the large population
Factors for market development is not sufficient, esp. for advanced fin. products
Huge Muslim pop. means huge market opportunities, mainly for retail products
Less economic development hinders overseas inflow of funds to IF industry
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A good source of information for various countries Information on the development in each country is available for 33 countries • Common information throughout counties on Banking, Capital Markets including Sukuk, Asset Management, Legal development, etc. Four African countries are included • Kenya, Tanzania, Nigeria, South Africa 11
3. Sukuk in Africa and the World
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Countries in Africa with Sukuk experience
Sudan
Nigeria
Gambia
Mauritius
South Africa
Large nations
Small nations
Non-Muslim
13
Recent track records by non-Muslim sovereigns
United Kingdom (2014-6)
Hong Kong (2014-9)
South Africa (2014-9)
Luxembourg (2014-9)
14
Institutional requirements for a Sukuk market Laws: Sukuk/ Bankruptcy etc.
Issuers
Investors
Rating Agencies
Central Settlement System
Accounting Systems
Lawyers
Investment Bankers
Shariah Board
Asset Managers
Payment Systems in banks
Accountants
Regulators
Pricing mechanism
Benchmark 15
Rationale for issuing Sovereign Sukuk (1) Raising public awareness/ appealing to the Muslim nationals
(2) Providing banks with the highest credit instruments for liquidity reserves
(3) Contributing to other issuers by providing benchmark “profit rate”
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4. Economic Development and Islamic Finance
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Demand for finance: make it Islamic
Transaction • Infrastructure development • FDI Promotion • SME Promotion
Financial System Upgrading • Financial Inclusion • Microfinance • Banking and Capital Market develpment 18
Two major virtues of Islam
Fairness
Diligence
Low-income group must be financially supported.
Recipients must work using funds.
Foreign countries will provide financial aids.
Utilize funds for further development 19
2 paths toward Islamic Capital Market Development
Initiate new products with Islamic transactions especially for retail/ microfinance
Promote mainly conventional financial system to facilitate development of Islamic Finance
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Seek for your own style …
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