CAIRO: Egypt has keen interest in developing Islamic insurance, or takaful, which makes up 5 percent of Egypt’s $1.45 billion insurance market, but it is expected to grow dramatically, according to a March report by Islamic consultancy BMB Islamic.
Salama Islamic Arab Insurance’s chief executive Saleh Malaikah said this month that demand for its products in Egypt have grown significantly since the revolution.
According to data from Bankscope and Thomson Reuters, Egypt could see Islamic finance assets grow to $10 billion in 2013 from $6 billion in 2007. Challenges remain, given the less than encouraging history of Egypt’s Islamic finance industry.
Millions of Egyptians were stung by ponzi schemes in the mid-1980s, when a number of money management companies touted Islamic investments at returns above local interest rates.
Britain and France, for example, have changed regulations to accomodate Islamic transactions. And Malaysia, with its thriving dual system of conventional and Islamic finance, has been the biggest success story in the industry, serving as a model for new markets looking to offer Islamic products.
Egypt is going to look towards the Gulf for money and it’s going to have to offer Islamic options to maximise investments.
Cairo-based National Bank for Development which is converting into a full-fledged Islamic bank, is already 49 percent-owned by Abu Dhabi Islamic Bank. Al Baraka Egypt is in fact a unit of Bahrain’s Al Baraka Bank.
The head of the Egyptian Financial Supervisory Authority (EFSA) said last year Egypt would issue its first regulations governing sukuk in the second half of 2010 and later delayed further to the first quarter of 2011. That deadline has passed as well as the government restructures and plans now appear in limbo.
Experts say the government will need to issue debt guidelines for sukuk issuance and remove tax barriers that make Islamic transactions commercially unviable in order to draw foreign investment from oil-rich Gulf countries.
Although Egypt is considered the birthplace of Islamic finance, which adheres to Islamic principles banning interest and speculative trading, its growth has lagged due to past corruption scandals, while the previous government sought to enforce a more secular financial system.
But after the Egyptian revolution toppled Hosni Mubarak and his government, Muslims like Abbas are embracing Islamic banking, raising the prospect that Egypt could become another thriving centre of Islamic finance.
“I prefer Islamic finance, it keeps me far from usury and I feel my money is blessed,” said the 50 year-old research centre manager at the Mohandessin branch of Al Baraka Egypt Bank.
“My husband has been dealing with mainstream banks for more than 30 years and all his projects failed because they were funded by unblessed money.”
According to a 2009 report by consulting firm McKinsey, Islamic banking only accounts for 3 to 4 percent of Egypt’s $193 billion banking industry. That compares with 46 percent in the United Arab Emirates.
“In a post-Mubarak era, the urgency of rebuilding and changing things will clash with the absence of resources and lack of money,” said Ibrahim Warde, adjunct professor at The Fletcher School of Diplomacy at Tufts University.