Financial Development in Sub-Saharan Africa

Muslim populations currently underserviced by conventional finance—only 24 percent of
Muslims have a bank account compared with 44 percent for non-Muslims (Demirguc-Kunt,
Klapper, and Randall 2013).
Recent empirical work indicates that
Islamic banking is conducive to economic
growth and financial inclusion in low- and
middle-income countries, including in
sub-Saharan Africa (Imam and Kpodar
2015; Kammer and others 2015). The
Islamic finance principles of risk-sharing
and asset-based financing (that is, the
strong link of credit to collateral) are
considered to help promoting
macroeconomic and financial stability
through better risk management by both
financial institutions and their customers.
Particularly, Sukuks, the Islamic bonds that
are structurally similar to asset-backed
securities, are considered to be well-suited
for infrastructure financing, thereby
supporting long-term growth and
economic development. 14 Islamic finance
principles are also considered to serve
SME financing well, thereby promoting
inclusive growth.
Nonetheless, Islamic finance poses
particular challenges in terms of
regulation, supervision, and monetary
policy owing to the specific feature of its
transactions. For example, the regulation
and supervision frameworks should take
into consideration Islamic finance
specificities such as profit-sharing
investment accounts and Shari’ah
governance.
Figure 10. Sub-Saharan Africa: Breakdown of
Islamic Finance Assets
(Percent of total assets, end-2014)
Source: Islamic Financial Services Industry Stability Report 2015.
Figure 11: Access to Financial Services
90
80
70
60
50
40
30
20
10
0
Islamic Fund
assets
8%
Sukuk
outstanding
5%
Takaful
contributions
3%
Banking
assets
84%
R² = 0.1154
R² = 0.1571
0 20 40 60 80 100
Muslim Population (%, 2010)
Account at a financial inst. (%, 2014) Borrowed from a financial inst. (%,2014)
Source: World Bank (2014b) Global Findex 2014; and Pew Research
Center.
18
16
14
12
10
8
6
4
2
0
14
Senegal and Côte d’Ivoire have recently issued Sukuks of US$164 million and US$246 million, respectively, to
finance infrastructure projects, while South Africa issued US$500 million with the aim to become the Islamic
finance hub for sub-Saharan Africa’s infrastructure financing.
INTERNATIONAL MONETARY FUND 23