The recently issued and first rand-denominated Sukuk Al Ijarah in Africa provides finance options for small and medium enterprises (SMEs).
Mohammed Ameen Hassen, the head of Shari’ah Banking at Standard Bank, said although it was not the first significant South African sukuk, it was indicative of increased confidence in the Shari’ah finance market and, together with increased development and uptake of available Shari’ah-compliant finance products, showed that South Africa was becoming an advanced Islamic financial market.
Standard Bank has worked with their Shari’ah Advisory Committee and Merchant Capital to launch the first Southern African Shari’ah-certified financing solution that offers working capital for entrepreneurs who want to consume Shari’ah-compliant products and services.
Ryan Cohen, Chief Relationship Officer at leading alternative lender Merchant Capital, said while the universe of Shari’ah-compliant products had to-date been limited, the Merchant Capital Advance directly addresses the challenges and lack of options facing Muslim entrepreneurs.
“While most entrepreneurs face the same challenges, Muslim-owned businesses have an additional layer of complexity in that they want access to Shari’ah-compliant financing solutions. Without them, Muslim businesses are challenged to grow and, as a result, make up a big portion of South Africa’s underserved SME sector,” he said.
He noted that the Merchant Capital Advance was brought to market in early 2020, just before Covid-19 started to impact the economy.
“We have since deployed over R250 million in funding to nearly 1 000 Muslim-owned businesses across a wide range of sectors, with an 85% repeat financing rate. This tells us that our product is not only filling a need, but also driving sustained growth in the Shari’ah business community,” Cohen added.
Muslim-owned businesses generated 10% of South Africa’s gross domestic product, which paints a clear picture of the opportunity to grow the sector in all areas, including Shari’ah-compliant financing, banking, taxation, insurance and other financial services needed for businesses to really thrive, he further said.