ISLAMIC FINANCE DEVELOPMENT REPORT-CAN TANZANIA FITS IN?

According to Islamic Finance Development Report and Ernst and Young World Islamic Banking Competitiveness report, all of 2013, Islamic financial institutions have grown tremendously over the last decade reaching thousands with combined assets in excess of USD 1.5 trillion and the customer base of more than 34 million, two-third are residing in QISMUT (Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey). It is projected that the Islamic Finance industry shall continue to grow at growth rate of 19.6% over 2013-18 across QISMUT countries to reach USD 1.6 trillion by 2018.

ISLAMIC FINANCE ASSETS CONCENTRATED IN FEW COUNTRIES.

In the list of top ten countries, Malaysia has the largest Islamic Finance industry with total assets in excesses of USD 411 Billion, 30% of the global Islamic finance sector, followed by Saudi Arabia and Iran. These top ten countries make up 94% of Islamic Finance assets with 64% concentrated in the top three countries alone. In terms of Islamic banking assets, Saudi Arabia despite absence of Islamic banking legal framework, topped the top ten list, followed by Malaysia and Iran. However, countries like Turkey and Indonesia are expected to grow significantly. On the other hand, in terms of total assets, number of institutions, stock performance and financial performance, Qatar tops with strong performance, followed by Sudan and Bahrain.

Islamic Banking is the most developed sector of Islamic Finance with strong performance and institutional depth among leading countries.Performance has been positive with most countries showing average return on equity in excess of 10% save for UAE, Kuwait and Bahrain. Indonesia is the top perfomer with average return on equity of 15% and Bahrain was the only country to have negative poerfomance. Nearly a third of Islamic banking institutions are windows. This demonstrates that even Islamic windows are acceptable to consumer and they continue to represent 31% of Islamic banking institutions.

RECENT ENTRANT IN THE TOP TEN LIST.

There are several recent entrants (countries) which made their way to the top ten list of countries with significant development of Islamic Banking in terms of total assets, institutional depths and financial performance. For example, Turkey and Iraq. Turkey introduced participation (Islamic) banks in 1990's and according to Islamic Finance Development Report 2013, Turkey ranked number five ahead of UAE, the home of the first Islamic Commercial Bank where as Iraq scored ten position slightly below Iran, which runs its whole banking system based of Sharia rules.

Apart from quantitative performance of the new entrant, qualitative performance shows significant developments. The report on the knowledge indicator shows that Oman which introduced Islamic Banking in 2011 scored eighth position based on the number of educational institutions offering degrees or courses in Islamic Finance and number of research published in the last three years. Oman has four institutes offering Islamic Finance courses and has issued six research papers on the subject in the last years. Important to note that Sri-Lanka despite being a non-Muslim majority country has scored ninth position on the list due to an established educational infrastructure which included seven institutions offering Islamic Finance cources and two universities offering degrees in Islamic Finance.Muslim minority countries like USA, Australia, France and India also performed well. In absolute numbers, UK and Malaysia lead the way on the knowledge front in terms of institutions and research.

On education and research as sub-indicators of knowledge indicator,countries like Maldives, Oman and Tunisia made their way in the top ten list. On education, Maldives scored tenth position with strong Islamic Finance education infrastructure relative to its size, with three institutions offering Islamic Finance courses although the country doesnt have significant Islamic Finance sector (one Islamic Bank with limited activity). On research, Tunisia scored number three and Oman number six on number of research papers published on Islamic Finance for the last three years (2010-12)ahead of prominent centers of Islamic Finance such as Pakistan and UAE respectively. In absolute numbers of research papers, Malaysia is a leader with 169 research papers during the period. However, UK leads with 60 institutions offering courses and 22 institutions offering degrees in Islamic Finance.

On governance indicator, which measures and assess regulatory environment, Sharia and corporate governance based on the guidelines of IFSB and AAOIFI; Singapore, Oman, Nigeria, Australia, Sri-Lanka, South Africa, UK and Jordan featured in the top ten list on various sub-indictors ahead of Saudi Arabia which has highest islamic finance sector assets. On the regulation sub-indicator, Singapore,Oman and Nigeria featured in the top ten where as KSA, UAE, Indonesia, Turkey are absentees despite holding sizeable Islamic Finance assets. Similar position can be noted on Sharia governance, where you find Jordan on the top ten but there is no KSA, Iran, Turkey and Indonesia despite being in the top ten on islamic finance assets. Sizeable number of new players are also absent on this category, hence new and old players need to focus on improving Sharia governance.

EAST AFRICAN COUNTRY ON THE TOP TEN LIST.

On awareness indicator which measures number of seminars, conferences and news articles related to Islamic Finance, new entrants have dominated the top ten list which is led by Oman with 8 seminars, 3 conferences and 531 articles related to Islamic Finance. Tunisia, Mauritania and Djibouti which has recently introduced Islamic finance have also performed well and made it to the top ten.

On the conference sub-indicator which is based on number of conferences held in 2012 with more than 100 participants, African countries have dominated in the top ten list. Mauritania, Tunisia, Djibouti, Sudan and Uganda are on the list. Uganda is the only country within East African Community which has featured in the top list on conferences being seventh on the list ahead of five countries in the QISMUT except Malaysia. Interestingly, Uganda has no Islamic Bank or window yet, but there has been a growing interest to launch Islamic Banking services in the country and the cabinet minister have endorsed the Islamic Banking Bill expected to be tabled any time in 2014. If the bill passes, it will be the first country in the EAC to have legislation targeting Islamic banking. All these are good news for Uganda and for east africans.

However, Tanzania and Kenya must speed and wake up in their efforts to develop Islamic Finance taking note of the fact that the two countries already have Islamic Banks/Windows and with sizeable Muslim populations. Well,the question is, can Tanzania and Kenya feature in the next publications of the report? Time will tell but due to efforts taken today,I believe Tanzania can.