Islamic finance and food sector need convergence

The two Sharia-compliant industries could work together for their mutual benefit
Dubai’s recently unveiled strategy to be the capital of the Islamic Economy brings with it a range of exciting opportunities as well as some interesting challenges.

Islamic finance and food sector need convergence

Islamic finance and food sector need convergence

Food and finance are the two most emergent opportunities. Islamic finance has excess liquidity and limited Sharia-compliant investment opportunities; the expanding Halal food sector is under-supplied and in need of capital. So what is stopping these two from working together for their mutual benefit?
Over the past decades, the Islamic finance and Halal food industries have developed in separate, isolated silos. Despite having common roots in the Quran, (and specifically even in the same chapter, Surat al Baqarah) there has been very little interaction between these two Sharia-compliant industries.
On the one hand, there are continued reports of excess liquidity in the Islamic finance sector, albeit mostly related to institutional funds that are looking for fixed-income investments opportunities. According to data from Thomson Reuters, Islamic finance assets reached $1.32 trillion (Dh4. 8 trillion) at the end of 2012; average growth over the past four years has been at 19 per cent and sukuk market is growing at 10 per cent.
Overall, growth is 50 per cent faster than conventional banking in many of the core markets and, yet, somehow there is the feeling that something is missing; engagement with the real economy has not been achieved.

Islamic finance and food sector need convergence

Islamic finance and food sector need convergence

The food sector, on the other hand, struggles to keep up with demand from increasingly aware Muslim consumers who are becoming more vocal in terms of what products they want, as well as what they do or don’t consider to be Halal.
Level of traction
One glaring difference between the two is in terms of engagement. Over 70 per cent of the Muslim world is still “un-banked” in any shape or form, let alone with an Islamic bank. Islamic finance does not have much traction with the average man in the street, and most would not be that familiar with the technical terms.
In the food sector, it is a totally different story. Not only is the average Muslim fully engaged with the Halal food market, they also have strong opinions about what constitutes Halal compliance. Indeed, the expansion of the food sector is driven from both the consumer and producer ends, as consumers become more aware and vocal, and producers look for new opportunities in increasing saturated markets.
Another point of divergence is that in the Islamic finance industry, Sharia scholars tolerate minor amounts of interest or impermissible income, and the investment can still be considered compliant. In the food sector, any minor trace of haram ingredient would be rejected out of hand by the overwhelming majority of Muslim consumers. While there is zero tolerance among informed consumers, there is, paradoxically, a considerable degree of tolerance of the prohibited among educated Islamic finance scholars.
The Islamic Finance industry is largely controlled by Muslims, by scholars and senior executives. Yet, the common complaint within the industry is that a high percentage (one bank CEO stated as much as 85 per cent) of Sharia-compliant funds get re-invested in the mainstream interest-based markets to earn the profit that is later returned to the investor as being “Sharia-compliant”.
In direct contrast, the Halal food industry is largely in the hands of non-Muslim controlled companies, and yet the majority of them are very aware and respectful of the need to be compliant, and will convert their production lines to being 100 per cent Halal in order to secure the trust of the consumers.
As these two sectors expand, we can expect to see more avenues of convergence over the course of time. Following the example of Saudi dairy giant Almarai, major corporations in the food, personal care and pharmaceutical sectors could issue sukuk for expansion, and at the same time increase their credibility in the Halal marketplace.

Job creation
Given the real employment shortage within the Arab world — it is estimated that 60 million jobs will be needed by 2020 — one would hope the increasing focus on the Islamic Economy will be a catalyst to create more overlap between the twin pillars of food and finance. However, until there is greater awareness by governments, more transparent regulatory frameworks in the food sector, and more adventurous capital in the finance sector, one suspects that the silos may remain in place for some time yet.
From the perspective of the Islamic economy, these two sectors clearly belong together, but it will take time and some imaginative, bold moves to bring them closer together.
One gets the feeling that when and where that happens, there will be a real engine of growth kicking into gear.
CREDIT: The writer is an advisor to Thomson Reuters on matters relating to the Islamic economy.

NBO gets ready to offer Sharia-compliant banking service

National Bank of Oman (NBO), the first local bank in the country, said that it is wellprepared to launch its Sharia-compliant window and will have a presence across all regions in the Sultanate within a year once all regulatory approvals are in place.

The bank is ready to roll out its Sharia-compliant products at its first branch in Al Azaiba and has well qualified staff and systems in place to offer a broad spectrum of these products and services to all its customers, said a press release.

NBO gets ready to offer Sharia-compliant banking service

The bank has also appointed a Sharia Board comprising of well-experienced and knowledgeable Sharia scholars to supervise its Islamic banking business. NBO is very keen to make this plan the most attractive of its kind in the market. In addition, the NBO will provide to its customers in these branches, facilities for electronic self-service, such as ATMs etc.

NBO’s CEO, Salaam Al Shaksy said, “We at the NBO are very keen to provide products and services in accordance with the provisions of Islamic law to meet the various requirements of the community. To achieve this goal, we are committed to the pledge that we have made to become pioneers in this area, and offer innovative and Sharia compliant products and services-.

The bank serves its customers in Oman through 67 branches and 173 ATMs and CCDMs as well as three branches in Egypt and one in the United Arab Emirates.

Shariah products see significant growth

Islamic financial products represent a class of investment which appeals to those looking for socially responsible or ethical investments and are a fast-growing asset class globally.

It is estimated that investors globally hold more than $1.5 trillion in Sharia-compliant assets and currently there are more than 500 funds globally that comply with Islamic principles, Central Bank of Bahrain executive director of financial institutions supervision Abdul Rahman Al Baker said at the opening session of the World Islamic Funds and Financial Markets Conference (WIFFMC2012) at the Gulf Hotel yesterday.

“One-third of these funds were launched during the past seven years, while sukuk is another Islamic financial instrument that shows a significant growth during the past five years.

“It was estimated that the global sukuk market exceed $200 billion by the end of the first quarter of this year. Actually, the year 2012 saw a revival in the global sukuk markets due mainly to gradual recovery of global economy and investors’ sentiment which drives the demand for sukuk.

“It is clear that sukuk issuance in the first quarter of 2012 exceeded all expectations reaching a record $43bn globally. This is almost double the average amount of sukuk issued in any given quarter in the past year, and represents half the total amounts of sukuk issued throughout 2011.

“In spite of the recent credit crunch and widespread global economic slowdown, the prospects for growth in Islamic securities markets are likely to be positive,” he said.

Shariah products see significant growth


“This positive trend can be attributed to the rapid expansion and increasing sophistication of the GCC financial markets, as well as the geographical spread of Islamic securities products and services that record remarkable growth in Europe, Asia Pacific countries, North Africa and the energy rich Central Asian states.

“In Bahrain, the mutual funds industry is one of the fastest growing segments of the overall financial sector. With around $9bn in assets under management, through more than 2,700 funds, the industry has been growing at an annual average of about 15pc in recent years. Overall, there are 100 Islamic funds incorporated and registered in Bahrain with total assets of $1.7bn as of March.

“The CBB, through its enabling legislation, promotes the development of new products for investors in both Islamic and traditional finance, while at the same time providing credible regulation in both areas.

“The CBB, having pioneered the development of sukuk, remains active in the sovereign sukuk market, with a total of $1.2bn medium to long-term sukuk issued, complemented by a regular programme of short term issuance,” he added.

“Furthermore, the CBB had successfully issued a five-year maturity Islamic Leasing Sukuk in the local market with a value of BD200m.

“It is the CBB’s hope that such initiatives will go a long way in harmonising market practices and creating a deep and vibrant Islamic capital market.

“Generally, the potential size of Islamic finance market is vast, and the accelerated establishment of Islamic finance hinges on attracting the flow of these potential funds into Islamic investment.

“However, it is important to ensure that Islamic funds and have solid and strong foundations for future development and growth.”


Dubai Islamic Bank's shares fall further

Dubai Islamic Bank (DIB) fell for the third time after the UAE’s largest Sharia-compliant lender said it will cut its dividend payment in accordance with Central Bank advice.

Dubai Islamic Bank (DIB) fell for the third time after the UAE’s largest Sharia-compliant lender said it will cut its dividend payment in accordance with Central Bank advice.

The DIB shares declined 1.4 per cent to Dh2.19 in Dubai. The benchmark DFM General Index dropped 1.64 per cent. The dividend for last year will be 10 fils a share instead of the 15 fils the bank proposed last month, it said in a statement to Nasdaq Dubai yesterday.

Gulf Finance House

Gulf Finance House, a Bahraini investment bank, yesterday reported a narrower year-on-year net loss in the fourth quarter of last year of $3.76 million (Dh13.79 million). The loss compared to a $186.6 million net loss in the fourth quarter of 2010.

Gulf Finance House has restructured and paid down debt and shored up its capital in recent years as it transitions to a new business model focusing on the development of Islamic financial institutions in the region.

The company’s Dubai-based unit, G Capital, last year partnered with Gurmen Group to buy Turkey’s Adabank for $75 million. GFH said full-year net profit last year reached $381,000, compared to a loss of $349 million in 2010.

Egypt telephony

Mobile telephone subscribers in Egypt grew 18 per cent year-on-year to 83 million in 2011, the Egyptian Ministry of Communications and Information Technology (MCIT), said on its website Thursday.

Subscribers of Egyptian mobile telecom operators Vodafone Egypt, Mobinil, and Etisalat Misr, a unit of etisalat, reached 36.7 million, 32.9 million, and 13.8 million respectively by the end of 2011, the MCIT data showed.

“This represents a penetration rate of around 104.4 per cent, up from 90 per cent at end-2010,” said Ahmad Adel, a telecom analyst at Cairo-based Naeem Brokerage.

“We forecast 15 per cent subscriber growth in 2012 to 96 million, which would take penetration to 116 per cent.”

National Electricity

Saudi Electricity Co’s unit National Electricity Transmission Co plans to tender local power transmission projects this year worth more than 12 billion Saudi riyals, pan-Arab daily Al Hayat reported yesterday citing an executive. National Electricity Transmission is currently implementing, in cooperation with contractors, more than 200 projects valued at more than 25 billion riyals, Saleh Al Onaizan, the company’s chief executive, told the paper.

Equate Petrochemical

Kuwait-based Equate Petrochemical Co, whose two major shareholders are the local state-run Petrochemical Industries Co and US-based Dow Chemical Co, said on Wednesday its 2011 full-year net profit rose 20 per cent to $1.05 billion compared with the previous year.

“These profits were realised due to operational excellence at all production units, as well as the increase in prices of petrochemical products globally as a result of stability in demand,” Hamad Al Terkait, the company’s president and chief executive, said in a statement.

Sales exceeded $2.5 billion last year which is unprecedented in Equate’s history, he added. In other news, Equate said in the statement that in April Terkait will be succeeded by Mohammad Husain as its CEO.


Abu Dhabi National Takaful Company yesterday announced financial results for the year ended December 31, 2011. Takaful posted a net profit of Dh24.4 million for 2011 compared to Dh21.0 million for 2010, an increase of 16.2 per cent.

Total cash and bank balances for the year were Dh170.2 million compared to Dh159.0 million for 2010, an increase of seven per cent.

United Arab Bank

United Arab Bank Thursday approved the distribution of a cash dividend equal to 20 per cent of the paid up capital. The bank said that the dividend reflected its strong financial performance, which was Dh330 million for 2011.

Abu Dhabi Islamic Bank and Canadian University of Dubai partnered to support the community in education & financial services

Dubai, February 20, 2012: In a move to make higher education more accessible to local and international students, Canadian University of Dubai (CUD) and Abu Dhabi Islamic Bank (ADIB) have formed an innovative partnership to provide students with flexible new options for education financing.

The partners announced details of the new program at the official signing of a Memorandum of Understanding (MoU) at the CUD Red Theatre between Mr. Buti Saeed Al Ghandi, CUD Chancellor, and Mr. Waheeb Khazraji, Head of HR at ADIB.

The key innovation in the program is ADIB’s issuance of Sharia-compliant financial education services, not normally provided in the education sector, that will allow for more flexible repayment plans at extremely low profit level rates. Additional benefits of the partnership include opportunities for top CUD students to be accepted in ADIB’s leadership program and student participation in an ADIB Executive Speaker Series at CUD.

In return, CUD will become a key service provider in ADIB’s extensive staff educational programs. Bank employees will enroll in CUD’s Masters and Bachelor programs at a discounted rate, helping them to advance their career opportunities and attain their personal educational goals. CUD’s flexible delivery schedule allowing students to study on weekends and evening allows for the employees to work and study simultaneously.

Buti Saeed Al Ghandi, Chancellor of CUD said: “We, at the Canadian University of Dubai, are very pleased to announce a partnership with the leading bank in Islamic Finance, Abu Dhabi Islamic Bank. This new partnership will allow both institutions, as respective leaders in their field, to cooperate for the betterment of our respective communities and the entire United Arab Emirates.

This includes innovative student financing options, unique to CUD, and special educational offers for ADIB employees. We are very excited by this historic agreement, and look forward to sharing the benefits with our community.”

Waheeb Khazraji, Head of HR at ADIB, said: “This agreement comes in line with our commitment to support education in the UAE and make it accessible to all, as it is considered an essential element in supporting the economic growth of the country. It also reflects our efforts to provide more flexible financial solutions to students, in order to help them in covering their higher education expenses.

Under this agreement, ADIB staff will be able to attend UAE’s first post-graduate program in Islamic Banking, and this comes as part of our commitment to develop our UAE national workforce to improve the Islamic banking sector and contribute to the development process in our beloved country.”

The initiative is part of a wider plan by CUD to encourage Emiratis and expatriates to further their education. In recent weeks, a series of Open Days has been held to showcase the university and the significant new initiatives it has launched to allow all students to achieve their educational goals. CUD works hard to accommodate the goals of both its part-time and full-time students and offers Master and Bachelor courses on evenings and weekends in addition to the standard daytime courses. The result is that students are able to study in an active and vibrant campus seven days per week.

Dr. Karim Chelli, President of CUD, added : “This partnership with ADIB is going to benefit CUD students and ADIB employees in many different ways. A critical component of the partnership for us is the introduction of a more flexible and innovative student loan program to complement our existing scholarship and bursary programs. Offering a full array of options for education finance is critical to CUD so that our students can fully focus their energies on their studies and excel in their future careers.

We have a great scholarship program for the meritorious students, and a bursary program for students in need. However, the missing piece for us was a comprehensive financial support program for students that included affordable student loan arrangements, and now we have that thanks to our partnership with ADIB.”

In attendance at the ceremony was HH Sheikh Mohammed Bin Maktoum Bin Juma Al Maktoum, who is an MBA student at CUD.

BankDhofar set to launch Islamic banking

MUSCAT BankDhofar has appointed Deloitte and Touche for a market assessment and feasibility study into launching of Islamic window services at the bank, a press release said.

The bank has also appointed a new head of Islamic banking to prepare it to handle the new service.

BankDhofar is planning to implement Islamic financial services and has already invested in training programmes for executives, providing them with insights into planning and executing Islamic banking products and services.

This study is in response to the Royal Decree issued last year by His Majesty Sultan Qaboos Bin Said.

“At BankDhofar we are planning to offer customers Sharia compliant products and services through dedicated service channels,” said Mohamed Redha Jawad, general manager, Wholesale Banking.

“The feasibility study will enable us to offer customers the best services possible and to ensure that we are abreast of all new regulations and standards for Islamic financial services,” he said.

With assets worth around 1.5 billion rials, BankDhofar, is ranked number 1, as the “Best Bank in Oman 2010” by the Oman Economic Review-Gulf Baader Capital Markets, Business Today’s ‘Banks & NBFCs’ survey conducted by Ernst & Young and “Best Bank in Oman” by the pre-eminent international finance magazine Euromoney.

SR10bn Mobily loan deal to boost data services, revenues

RIYADH: Etihad Etisalat (Mobily) signed a SR10 billion loan agreement with seven local banks on Sunday to boost its revenues and invest in its broadband and data services business.

Mobily Chairman Abdulaziz Saleh Al-Saghyir signed the deal with the representatives from the lending banks in Riyadh.

Mobily Managing Director and Chief Executive Officer Khalid Al-Kaf were also present.

The banks which provided the refinancing facility included Al-Rajhi Bank, Banque Saudi Fransi, National Commercial Bank, Riyad Bank, Samba Financial Group, SABB and Saudi Hollandi Bank.

Mobily has more than 20 million customers in its network.

It posted a 16 percent increase in its fourth-quarter profits recently, buoyed by higher data revenue and post-paid mobile subscriber numbers.

Speaking to Arab News following the signing ceremony, Al-Kaf said the agreement paved the way for a Sharia-compliant refinancing loan offered by a group of strong local banks with a repayment facility spread from five to seven years.

“It is a four-tranche Islamic loan divided into SR2.5 billion each,” Al-Kaf said.

He pointed out that the first SR2.5 billion will be spent on revolving activities and for future financing of its projects, another SR5. 8 billion will be reimbursed to settle the old finances, while the balance will be diverted to the implementation of Mobily’s strategic program — growth efficiency differentiation (GED).

He said the revolving fund would also be used to finance sum of its upcoming projects in service applications and network roll out such as 4G, IPTV and fiber network.

Although the maturity of old financing ends in December 2012, Al-Kaf said Mobily undertook the refinancing now since the prevailing Murabaha rate was conducive to obtain such a facility from the banks because of their attractive borrowing rates.

“There is enough liquidity available in the Kingdom and its the right time for such deals,” the CEO said. He said the covenant put out by the banks are flexible to suit Mobily’s expectations as a matured company in the Kingdom.

“The conditions in the agreement were minor and they suited our requirements,” Al-Kaf said.

Al-Saghyir said the GED program of Mobily will be spread throughout a period of five years.

“Its an ambitious program which has some 280 projects in its fold,” he said.

Two tranches of the facility carried a profit rate of 0.7 percent over the Saudi Interbank Offered Rate (SAIBOR), with the remaining two pieces priced at 0.65 percent over SAIBOR.

The three loans being refinanced were the remnants of its SR10.78 billion debut loan — signed in 2007 — a SR1.5 billion facility signed in 2009 and a SR1.2 billion short-term loan agreed in December 2010.

South Africa all set to introduce Islamic Bonds

Johannesburg: Plans by South Africa’s National Treasury to introduce Islamic bonds are gaining a strong support in the African country, amid expectations the move would help boost the state’s economy.

“I am sure this was at the request of those Middle Eastern countries because SA has a small Muslim population,” Kokkie Kooyman, head of Sanlam Investment Management told Fin24.

The National Treasury has announced plans to introduce Islamic bonds as part of efforts to get a share of the booming Islamic banking industry.

Other financial instruments planned by the Treasury include Mudarabah, a form of investment partnership between banks and businesses that shares the risk and losses.

There is also Murabah, a transaction in which the bank buys the asset then immediately sells it to the customer at a pre-agreed higher price payable by installments.

The Sharia-compliant Islamic finance is not new to South Africa with different banks and investment companies offering these products. Several banks as the First National Bank and ABSA bank offer Sharia-compliant services.

Kooyman said the Sharia-compliant offerings are worth pursuing because the end result or return is the same as that of conventional banks.“The returns are also not much different for ordinary investors,” he said.Islam forbids Muslims from usury, receiving or paying interest on loans.

Transactions by Islamic banks must be backed by real assets — not shady repackaged subprime mortgages and banks cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Sharia-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.Analysts opine that offering Islamic bonds will help South Africa lure investments from the Middle East and the Gulf region.

“If people that have been using Islamic banking have been happy all the time, let us have (more) of it,” Steve Meintjes, a senior banking analyst at Imara SP Reid, told Fin24.The banking expert said the introduction of more Islamic finance products into South Africa would enhance the economy.

“The SA economy needs more finance. Islamic banking will enhance the productive capacity of this economy,” Meintjes said.Tom Winterboer, a banking analyst at PwC, noted that Islamic finance products can be accessible to investors beyond the Muslim population.

“It must be a good thing to happen to South African investors. It is a different principle from the domestic finance we have come to know,” Winterboer said, adding, however, that it needed a different expertise.“But South African banks have this expertise.”

Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.

A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.

Dubai's Majid al Futtaim announces sukuk roadshow

Dubai’s Majid al Futtaim will begin meeting investors on Sunday ahead of a potential Islamic bond, or sukuk issue, a statement from the lead managers said on Tuesday.

The mall developer, which is the sole franchise for Carrefour in the Gulf, will meet investors in Abu Dhabi and Dubai on January 29, before a second day of roadshows in London and Kuala Lumpur on January 30, it said.

Abu Dhabi Islamic Bank, Dubai Islamic Bank , HSBC and Standard Chartered are the lead managers for the potential transaction, which would be the company’s first debt capital markets issue.

The company has been eyeing global debt markets for several months, completing a series of roadshows for a conventional bond in June but not going ahead with a print because of the impact of market volatility on pricing.

It then set up a sukuk programme to have the option to tap Islamic liquidity and take advantage of healthy demand for sharia-compliant assets amid ongoing global risk aversion.

A senior executive told Reuters in November the company hoped to raise between $350 million and $500 million from its debut sukuk offering.

This would be the first issuance by a private corporate firm in the Gulf and is regarded as a vanguard for other private sector companies in the region who, hit by limited liquidity in the loan market, are searching for new finance streams.

The unlisted firm raised $1 billion loan from a group of banks in July which was used for refinancing of a $1 billion loan maturing later this year.

MAF’s revenues grew by 10 percent year over year to 18.7 billion dirhams ($5.09 billion) last year and its net debt was around 7.5 billion dirhams.The developer expects to open around 15 new Carrefour hypermarkets and about 25 to 30 new supermarkets in 2012.

Islamic finance unpacked

THE National Treasury is considering issuing Islamic bonds and has asked interested banks to submit bids. Some local banks and the JSE already offer sharia-compliant financial instruments. These include the JSE Shariah All Share [JSE:J203] index and the JSE Shariah Top 40 – (Tradeable) [JSE:J200].

Other instruments include Mudarabah, a form of investment partnership between banks and businesses that shares the risk and losses. There is also Murabah, a transaction in which the bank buys the asset then immediately sells it to the customer at a pre-agreed higher price payable by instalments.

Kokkie Kooyman, head of Sanlam Investment Management: Global, said the Treasury’s Islamic bond issue would be part of a bid to “tap into” the unds from the Muslim countries that are shariah-compliant.

“I am sure this was at the request of those Middle Eastern countries because SA has a small Muslim population,” Kooyman told Fin24, adding the shariah products and funding are made attractive by the fact that they are not interest rate sensitive.

FNB Islamic finance offers shariah-approved banking options that are not limited to Muslims. They help FNB clients manage their day-to-day finances, whether they need an account for personal use or a number of products for their business.

Standard Bank Group [JSE:SBK], Africa’s biggest bank by assets, does not offer Islamic banking services in South Africa yet, according to Erik Larsen, the head of media relations at the bank.

In 2010 the bank launched its first Islamic savings and current account in Tanzania. In July last year Stanbic, a unit of Standard Bank, won approval from Nigeria’s central bank to provide Islamic banking services there.

Nedbank Group [JSE:NED], South Africa’s fourth-biggest bank, does not offer any Islamic banking products in South Africa. Absa Islamic finance offers businesses current and retail accounts. Its offerings range from savings, investments, term deposits and commercial asset finance.

Kooyman said the sharia-compliant offerings are worth pursuing because the end result or return is the same as that of conventional banks. “The returns are also not much different for ordinary investors,” he said. Pros and cons But Islamic banking, like conventional banking, has its advantages and disadvantages.

In terms of banking charges, clients of Absa Islamic banking and FNB Islamic finance pay the same fees as Absa and FNB clients banking conventionally; both banks are well known for charging high fees. In Islamic financing, loans for a house or a car offer fixed repayments, which are an advantage to many. This is not the case with conventional banks.

Banking experts said the introduction of more Islamic finance products into South Africa would improve the size of the economy. They added this would also help diversify the banking sector’s funding and investor base.

Steve Meintjes, a senior banking analyst at Imara SP Reid, told Fin24: “If people that have been using Islamic banking have been happy all the time, let us have (more) of it.”

Meintjes said: “The SA economy needs more finance. Islamic banking will enhance the productive capacity of this economy.” He warned, however, that investors who are interested would have to do a bit of homework to understand the products on offer.

Tom Winterboer, a banking analyst at PwC, said Islamic finance products can be accessible to investors beyond the Muslim population. Only 2% of South Africa’s population is Muslim but the demand is coming from non-Muslims, according to Absa.

“It must be a good thing to happen to South African investors. It is a different principle from the domestic finance we have come to know,” Winterboer said, adding however that it needed a different expertise. “But South African banks have this expertise.”

The government is also keen on opening the doors to Islamic finance banking in South Africa. It has proposed a tax amendment in a bid to put Islamic banks in South Africa on an equal footing with conventional banks.