An in-depth look at the development challenges facing
the regionand how they can be tackled.
Islamic Banking Oppourtunities in the Middle East and North Africa
There is a huge demand for Islamic products by small and medium enterprises in the Middle East and North Africa region and, according to this study, approximately 32 percent of such businesses remain excluded from the formal banking sector because of a lack of Shariah-compliant products. The study reveals that, there is a potential gap of $8.63 billion to $13.20 billion for Islamic SME financing within un-served and underserved SMEs categories, with a corresponding deposit potential of $9.71 billion to $15.05 billion across these countries. This is due to the fact these un-served and underserved SMEs do not borrow from conventional banks, only owing to religious reasons. This potential is a “new to bank” funding opportunity, which is still untapped, as banks and other financial institutions lack adequate strategic focus on this segment to offer Shariah-compliant products.
Many governments in the region have recently set ambitious targets to revise their energy strategy and are increasingly turning to renewable energy. They have also started implementing the regulatory reforms required to achieve these targets. According to the World Energy Outlook 2012, published by the Paris-based
International Energy Agency, the share of renewable energy in total power generation in the Middle East is set to increase from the 2 percent seen in 2010, to 12 percent by 2035.
The role of the micro, small and medium enterprise (MSME) sector cannot be over emphasized in terms of its contribution to GDP and employment generation, particularly in emerging economies. Studies indicate that formal SMEs contribute up to 45 percent of employment and up to 33 percent of GDP in developing economies (IFC: Scaling-Up SME Access to Financial Services in the Developing World 2010). These numbers are significantly higher when taking into account the estimated contributions of SMEs operating in the informal sector. In high income countries, SMEs contribute nearly 64 percent to the GDP and 62 percent to employment.