Posted on » Friday, November 08, 2013
DUBAI: Djibouti is promoting Islamic finance to increase banking penetration in the tiny African nation and help fund upgrades to the country’s infrastructure, its central bank governor said.
Djibouti sees Sharia-compliant finance as a way to pull itself out of poverty. That’s because most people are still not customers of banks, which limits the economy’s ability to assemble capital for investment.
Central bank governor Ahmed Osman said banking penetration had risen from 10 per cent of the population six years ago to 17 or 18 pc now, but that conventional banks were not attractive to many people for religious reasons.
The spread of Islamic banking will also help authorities move more business activity from the informal economy, which is unregulated and untaxed, to the formal sector, he added.
The Islamic banks, which now account for about 15pc of the country’s total banking assets and 12pc of deposits, are backed by investors from Yemen, Somalia, the UAE and Egypt – regional links which Djibouti hopes to strengthen.