One would expect the wise and serious, once they know a source of funding of those from whom they borrow, would go to that source with an aim to getting direct funding, for it will definitely be cheaper (most of the time) to seek funding from a primary source than from a secondary one.
The Islamic Finance industry, an industry that sieves financial products and services through Islamic rules and regulations, is a burgeoning industry with assets estimated to be worth about $ 1 trillion. Its attractiveness can be seen from its adoption by financial heavy waits like the World Bank, Dow Jones, and Britain among others. France and Japan have recently mooted the idea of formerly adopting it, with France even passing a legislative instrument to allow some of the industries products and services.
South of the Sahara
I have had the opportunity while working an living in the United Arab Emirates to attend the International Islamic Finance Forum for 3 year consecutively and apart from South Africa and few enterprising individual Africans (3 at most), Africa South of the Sahara has been missing from those conferences. Actually, on one occasion the absence of Africa was a topic on the final day of the conference when leading panelists and experts met for closing deliberations.
Sorry, but when we consider countries with financial needs, South Africa is almost not African (no pun intended). That is to say, judging by their financial status vis-à-vis the rest of most of Africa’s economies, South Africa is an outlier. Yes, and impressively, they were represented by their banks and private investment firms as well as others. And they were not disappointed, for at least one mega deal was announced two weeks after one of those conferences when SEDCO of Saudi Arabia invested 500 million dollars in Oasis Capital of South Africa.
The Conference
If you consider that the conference is attended by leading companies (Bankers, Financial Institutions, Law firms, Real Estate Companies) etc. from countries like USA, CANADA, US, AUSTRALIA, FRANCE, SINGAPORE, MALAYSIA, INDONESIA, AUSTRIA, GERMANY, as well as from institutions like the World Bank, DOW JONES, MOODY’s, FINANCIAL TIMES, and many more.
TSB Lloyds, the famous and historical United Kingdom Bank, attended this conference when they decided to adopt Islamic Finance, so did Devon Bank of Chicago. As for the Stock Exchange of Singapore, they announced their intention to take Islamic finance seriously in a big way; they sponsored the main luncheon of one of the conferences, and used that to invite the conference to hold its next European session in Singapore.
Islamic Finance friendly
Currently, because interest is the dominant philosophy upon which most financial systems are designed, the laws in most African countries are not Islamic Finance friendly. To ensure that African economies attract Islamic funds, there must be accommodation made within the existing financial rules of the countries to create an enabling environment for Islamic Finance. Britain is the most high profile example of what creating an accommodating environment for Islamic finance can do to an economy – within 5 years they now have 5 Islamic banks, and one insurance company.
The recent financial crisis caused a lot of destabilization with many financial firms, but Islamic financial firms posted impressive results within this period. This is because of the inherent discipline that Islamic Finance can instill (Britain is mooting adding Islamic financial products to its financial strategy mix). Due to the de-emphasizing of collateral as primary component to funding in Islamic finance, it has the potential of changing the dynamics of how and which projects attract funding. The best brains in these economies, even if they are from poor backgrounds, will now be sure of getting funding. Thus the human resource of the economy that uses this means of funding is maximized. There are many other benefits that can be referred to.
World Bank, For Example
As this author was writing a position paper on why the government of Ghana should adopt Islamic Finance as an additional and alternative financial tool, he found it sufficient that he could point to the fact that the World Bank is a 15% shareholder in an Islamic Bank in Kenya. Since our governments do listen to the World Bank a lot, they should be taking cue from their actions.
Africa’s governments cannot afford to not have an efficient system of attracting funding (local or foreign) for developing its economies. But not being where leading economies and institutions are tapping into funding, though Africa sources funding from those same economies and institutions is unacceptable. Since, there is nothing to loose in widening the financial landscape of a country, it is advisable that African countries who have not considered the benefits they can get from Islamic finance take the necessary steps to tap into it if their analysis shows that their economies would be positively affected by it.
