Africa’s Islamic finance growth will include a noticeable increase in banking assets across the continent, according to reports published by Moody’s.

There has also been growth in sukuk issuance, as prior to 2013 the number of Islamic bonds issued was ‘negligible’, but it grew to an average of $433 million per year across Africa from 2013-19.

The reports said Islamic banking assets have the potential to ‘grow noticeably’ particularly in Sub-Saharan Africa, which has 16 percent of the world’s Muslim population, and, more than a third of people - 35 percent - are currently ‘unbanked’ or have no form of bank account.

Sudan, South Africa, Nigeria and Senegal will lead growth in Sub-Saharan Africa, while Egypt and Morocco will lead growth in North Africa due to their large Muslim populations, Moody’s said, along with existing and rapidly evolving regulatory and supervisory structures.

“We expect Africa’s large Muslim population, low starting base and growing government interest in the sector to drive growth in Islamic banking assets in the continent,” said Mik Kabeya, Assistant Vice-President, Analyst, at Moody’s Investors Service.

The report on Nigeria showed the extent of sukuk issuance in the country - the government of Nigeria and state governments have issued Islamic bonds, with currently about $1.5 billion outstanding, which Moody’s said would increase product awareness and offer confidence.

The reports also said Egypt’s improved political confidence and Morocco’s stronger economic performance relative to regional peers, along with Nigeria’s low banking penetration and populous markets, will provide high structural demand for Islamic banking over the next decade, as awareness of Islamic banking products increases and, technology and agency banking boosts banks' outreach.

However, challenges due to limited product offerings and complex documentation as well as the need for Shariah board approvals, will persist, the reports said.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)

(imogen.lillywhite@refinitiv.com)

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020