The private sector arm of the Jeddah-based Islamic Development Bank planned to increase its activities in Africa, to widen the appeal of Islamic finance across the region, its chief executive said.
Established in 1999, the Islamic Corporation for the Development of the Private Sector (ICD) supports the economic development of its 51 member countries by financing private sector projects that follow Islamic principles.
Under a new strategy, the ICD was helping develop what it termed “Islamic finance channels” to spread sharia-compliant financial products more widely, ICD chief executive Khaled Al-Aboodi said.
Such channels included Islamic banks, investment and ijara (Islamic leasing) companies, and takaful (Islamic insurance) and retakaful firms.
Africa represents around 12 percent of the ICD’s cumulative investment approvals since inception, and this figure is expected to rise in coming years as projects come on line.
Some of the projects will be led by Senegal-based Tamweel Africa, jointly owned by the ICD and Turkey’s Bank Asya; Tamweel already holds stakes in Islamic banks in Senegal, Niger, Guinea and Mauritania.
Tamweel would establish an Islamic bank in Benin and was finalising a feasibility study for one in Mali, Al-Aboodi said. “We have prepared detailed projections for both banks, which will be presented to the board for final approval,” he added, without specifying the size of the banks.
In Chad, the ICD is supporting the establishment of an Islamic bank and a leasing company; both are to start operations as soon as they receive approval from authorities.
In Tunisia, the ICD has teamed up with the newly created sovereign wealth fund, Caisse de Dépôts de Tunisie, to set up a $30 million (R315m) fund to support businesses.
“Replication of this model in other member countries is under review,” Al-Aboodi said.
“North Africa represents a large and still untapped market of 190 million people. With the Arab Spring and the changing political map there are huge opportunities in these countries.”
Last month, the ICD tied up with Casablanca-based Al Ajial Funds, a unit of sovereign wealth fund Kuwait Investment Authority, to invest in Morocco’s private sector.
The ICD also hoped to improve access to sharia-compliant financing for small and medium-sized enterprises (SMEs) across Muslim countries, Al-Aboodi said.
“This is an important sector in all the member countries, including the higher income ones. ICD is now focusing on this sector by extending lines of finance to local banks and establishing ijara leasing companies and investment funds.”
The ICD has a network of ijara companies in Azerbaijan, Uzbekistan, Tajikistan, Kazakhstan and Albania, while it helped to establish the Euroasian Leasing Company in the Russian republic of Tatarstan.
The Palestinian territories could soon join the list as the first ijara firm in that market was readying for launch, a $12m company aimed at improving financing access for SMEs with ICD participation, Al-Aboodi said.
“Currently, the Palestine Ijara Company is getting all required licences and authorisations. The location was rented and equipped. The recruitment process is in its final stage.”
In Kazakhstan, the ICD plans to invest up to 35 percent of the subscribed and paid-up capital of Zaman Bank and convert it into the country’s second Islamic bank.
Last year, the ICD established the first SME investment fund in Saudi Arabia with a target size of 1 billion riyals (R2.8bn). – Reuters