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Sub-Saharan Africa


Islamic Finance: New Frontiers in Africa



When IFC first invested in Kenya’s Gulf African Bank in 2013, Islamic finance was a growing phenomenon in Sub-Saharan Africa. Gulf African Bank was among only a handful of financial institutions in East Africa to offer sharia-compliant financial products. IFC supported Gulf African Bank’s new model by providing $5 million equity and a $3 million trade finance line.


A year later, Islamic financial institutions have gained a firmer foothold on the continent.  Nigeria, now Africa’s largest economy, and Sudan, have joined the $100 billion annual market for sukuk, or Islamic bonds; while Senegal and South Africa are set to follow soon.


In Kenya, where 11 percent of the population is Muslim, Gulf African Bank’s sharia-compliant products are reaching a large number of individuals who may not have access to other banks. The bank now has 14 branches in Kenya, with a rising portfolio of small and medium enterprises.  In 2014, Gulf African Bank became the newest member of IFC’s Africa Micro, Small, and Medium Enterprise Finance Program, which works with banks in 13 African countries to increase lending to small-scale entrepreneurs. The Program is implemented in partnership with UKaid from the Department for International Development.


 “Gulf African Bank and IFC are playing a catalytic role in providing sharia compliant finance in Sub-Saharan Africa”, said Abdalla Abdulkhalik, Gulf African Bank CEO and Board Member. “Kenya is expected to introduce a regulatory framework for Islamic Financial Services, which should see increased investment from Gulf countries.” 


When introduced, the framework will help diversify funding in Kenya and will make the country friendlier to investors from the Middle East, many of whom seek sharia-compliant products.


IFC estimates that 39 percent of Kenya’s formal small and medium enterprises are owned by women.  As in most developing countries, women in Kenya have more difficulty gaining access to finance than men. Gulf African Bank is addressing the problem through its Annisaa product - a women-only transaction account.  Annisaa makes banking easier for women by offering them dedicated tellers and banking centers, as well as discounts at partner outlets.  To help Gulf African Bank better serve entrepreneurs, IFC will work with the bank on improving customer relationship management, accessibility and speed of service. 


Globally, Islamic finance is one of the fastest growing financial segments.  The African Development Bank estimates that by 2020, the value of Islamic financial assets should surpass the $4 trillion mark. 


IFC has invested in three Islamic financial institutions to date; Gulf African Bank, Al Kuraimi Bank in Yemen and Al Rajahi Bank of Saudi Arabia.


FREQUENTLY ASKED QUESTIONS:  ISLAMIC FINANCE


Islamic Finance, of sharia compliant financing, has been growing steadily since the first modern Islamic banks were established about 40 years ago.  At the end of 2013, the assets of Islamic commercial banks reached $1.8 trillion. By 2020, the value of Islamic financial assets is projected to surpass the $4 trillion mark (afDB, 2012). 


A key feature of global Islamic finance is the Sukuk market, which supports private foreign direct investment flows, not only from investors in capital surplus countries (such as the Gulf Cooperation Council) but also from institutional investors in markets such as Malaysia, UK, the United States and others.  These investments are directed towards real assets and project financing.  Globally, Sukuk issuance amounted to US$119.7 billion in 2013. 

IFC’s first Islamic finance transactions were in 1995, supporting leasing in Pakistan. IFC has since approved investments in 22 Islamic financing transactions to date for an aggregate amount of US$707.3 million, supporting financial and real sector projects in MENA and African countries. By investing in Islamic financial institutions; IFC aims to support financial inclusion and increase access to finance for entrepreneurs and individuals who may be outside the reach of conventional banking systems 


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First published: 04/28/2014

Updated: 06/03/2014

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