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A Resurgent Interest in Islamic Finance in Africa

International ratings agencies Moody’s, Fitch, S&P and various multilaterals have all published reports highlighting its potential – but the take-up so far has been disappointing. The Islamic finance industry in general has shown remarkable resilience in the wake of the Covid-19 pandemic. Not a single Islamic bank, worldwide, has collapsed over the last year. Sukuk is one asset class that has maintained its poise during the 2020 pandemic, with an estimated $155bn in 2020 (slightly down on the $167.3bn in 2019). However, the African reality is different. According to the Islamic Financial Services Industry Stability Report 2020, global sukuk outstanding totalled $543.4bn at end 2019, of which South East Asia and the Middle East accounted for $520bn. Africa accounted for a mere $1.8bn. “Islamic banking,” says Moody’s, “has made little headway in Africa despite the continent’s large Muslim populations. Sub-Saharan Africa (SSA) has around 18% of the world’s Muslim population but its Islamic finance assets make up only 1% of such global assets. The reasons include low levels of banking inclusion, low public awareness, limited domestic savings, and – until recently – scant government attention.”