Islamic finance is set to grow steadily across Africa as financing needs increase and global investors become more comfortable with the legal structures of Islamic debt securities, says Moody’s Investors Service in a recent report.
The report according to Moody, “Islamic Finance Africa; Promising growth prospects for Islamic finance in 18 African countries.” Vice President and Senior Credit Officer at Moody’s, Akin Majekodunmi said:
“The desire within Africa for stronger investment links with the fast-growing economies in the Gulf and Asia that have large Muslim populations with large pools of capital will help drive the issuance of sukuk on the continent.”
The report stated that Africa’s large Muslim population, which is predominantly unbanked, will also provide a solid foundation for the growth of Islamic banking assets.
Moody’s estimates that the share of Islamic banking assets as a percentage of total African banking assets will rise to over 10 percent over the next five years, from its current level of below 5 percent.
Since the start of 2014 there has been $2.3 billion of African sukuk, or Islamic bond, issuance, providing new funding sources for both sovereigns and financial institutions. However, African sukuk makes up just 0.5 percent of global sukuk issuance. As African sovereigns seek to diversify their funding base, the amount of sukuk they issue will likely increase. Egypt, Algeria, Morocco and Sudan have expressed interest in issuing sukuk this year or next and Moody’s forecasts at least $1 billion of sukuk issuance in Africa over the next 18 months.
Moody’s has identified 18 African countries that have the greatest growth potential for sukuk issuance, as well as Islamic banking. These include Egypt, Morocco, Senegal, Nigeria, Sudan and Kenya.
Source Oracle News