African governments are looking to sharia-compliant financial markets to attract investment from the Middle East. The trend is just gathering strength, and experts expect more funds to flow into infrastructure and other major projects.
The latest wave of finance to reach African corporations and governments is coming from the Middle East, with an increasingly large sharia-compliant component.
The Senegalese government closed on a 100bn CFA franc ($208m) sukuk – an Islam-approved bond that does not pay interest – on 18 July, and South Africa plans to launch its first sovereign sukuk this year. It could be valued at up to $700m, insiders say.
Like with other forms of bonds, sovereign issues – those from central governments – are critical for setting benchmarks for corporate issues and deepening financial markets.
Bahrain’s Al Baraka Banking Group announced in May that it plans to issue sukuk through its local operations in South Africa once the government takes the first step.
Money from the Middle East is also coming in the form of development finance. The Islamic Development Bank said in June that it is devoting $180m to renewable energy projects in Africa and plans to provide $7bn in finance to African countries by 2019.
While it is not through strictly Islamic financial channels, the Gulf states and Saudi Arabia had pledged $20bn in aid to Egypt by May of this year.
Categories: Africa, Banking, Banks, Economics, Economy, Finance, Islamic Finance, Sharia, Sharia Compliant Banking & Finance, Sharia Law, Socioeconomics