Africa 's Economic Development And Sharia Finance Essay

1397 Words Sep 2nd, 2016 null Page
Africa’s Economic Development and Sharia Finance
Hitherto, the bulk of funding deployed to finance Africa’s economic development has not been Sharia-compliant due to the requirement to pay interest to lenders. Periodically, an inability by governments to repay interest has eventually resulted in debt forgiveness by foreign banks. While Islam is a major religion on the continent, its communities have historically been underserved by banking systems and capital markets. Africa’s population is expected to double by 2050 to 1.9 billion, particularly in those countries with sizeable Islamic communities. This demographic growth should imply, therefore, a considerable increase in the demand for financial products satisfying Sharia principles. Access to Islamic financial products in Africa has, however, significantly lagged behind other regions, such as the Middle East and South East Asia. This is attributable to insufficient understanding, both legal and technical, by end-users and policymakers. Multilateral development agencies and banks are now playing a greater role in enhancing Africa’s understanding of Sharia-compliant finance. Furthermore, the International Monetary Fund (IMF) has also committed itself to a better understanding of Islamic finance nuances. There has been a growing realisation by governments that these mechanisms can play a significant role in providing alternative funding sources, particularly during a period when sovereign finances have been squeezed by the…

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