Until recently, African Muslims and non-Muslims alike have had limited access to Islamic banking and finance services. With the exception of Sudan and some limited and modest experiences in a number of other countries, the overall Shari‘ah compliant financial system in Africa is a recent phenomenon. While some Islamic financial institutions, such as the Dallah Albaraka Group or Dar Al-Mal Al-Islami, have been operating in some African countries for a number of years, the vast majority of Islamic finance presence in the continent is recent.¹ What is interesting is that the first Islamic bank, the first Islamic insurance or Takāful company, and the first Shari‘ah -compliant exchange traded fund (ETF) are all of African origin.

Africa is the most diverse continent on the planet, with an area of more than 30 million sq. km, 54 countries, and a population of approximately one billion. Countries in Africa are geographically diverse—ranging from the Seychelles with a size close to that of Singapore, to Sudan, which, until recently, had an area equivalent to a quarter of the size of the USA. Every country has its own unique characteristics. African countries are linked by political, economic, and cultural connections and interests. It is based on this vision that the continent is often researched as one body. As was rightly emphasised by one observer, “Although the fifty-three² countries of Africa rarely present a united position on controversial issues, there is often an African consensus.”³

Taken together, the continent has a larger land mass than China, the USA, India, Europe, Argentina, and New Zealand combined. With an estimated 1500 languages spoken by multiple ethnic and religious groups, the continent is indeed a large mosaic of cultures. The most populous country is Nigeria with approximately 170 million, while the smallest is Seychelles with a meagre 100,000 inhabitants.⁴ In many cases, national boundaries have been carved arbitrarily by accidents of history or as a result of colonial legacy. Thus, religious and urban groupings frequently cut across borders.⁵ Differences among the 54 African countries exist at the level of development, economic structure, and political and social environments. Per capita incomes, for instance, range from US$200 to US$20,000—as is the case with Burundi and Equatorial Guinea, respectively.⁶

Although it is too early to consider the African economy as one entity or a whole, it can be useful to consider the continent as an evolving organism, with lessons learnt in one country providing useful information for evaluation and doing business in another. Learning from the lessons of others and adapting new strategies to new markets could be useful strengths for financial institutions entering the African market or expanding their operations into other African countries.⁷

Some might divide the continent into North and South; or into North, South, and Middle; or a North subordinated to the Middle East and the Sub-Saharan. However, we adopt the most widely used division by international institutions by taking the continent as one entity while keeping in mind the regional economic grouping, and avoiding any classification based on race, colour, or political affiliation. As pointed out by Siemens’ CEO in Africa, “Some companies divide Africa into North and South or have a separate Middle East and North Africa division, but we decided the continent is a strong framework.”⁸ In fact, there is a sense of one Africa among the business community, as articulated by KPMG in one of its reports.⁹ A similar position has been pointed out by the head of the Casablanca Finance City (CFC), Saïd Ibrahimi, rejecting the expression “Sub-Saharan Africa” and arguing that “Africa begins in Tangier.” He further added that “Morocco is Africa. We feel we are much more African than we are Middle Eastern.”¹⁰

The present study divides the continent (with regard to Islamic finance) into five different regions, based on the regional division of the continent influenced by the existing economic blocks. The five economic groupings are the Arab Maghreb Union (AMU), the Economic Community of West African States (ECOWAS), the Central African Economic and Monetary Union (CEMAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC). Although every African country is a possible market for Islamic finance, in this research, not all its 54 countries are examined with the same degree of depth. Instead, the focus has been on those countries with some signs of Islamic finance penetration or those who have clearly expressed official backing to the industry. Thus, the Northern African countries covered in this study include Egypt, Morocco, Algeria, Tunisia, Libya, and Mauritania. The second group includes countries in the Eastern region of Africa, such as Sudan, Kenya, Mauritius, Tanzania, Uganda, Djibouti, Rwanda, and Ethiopia. The West African region is represented by Nigeria, Senegal, Gambia, Ghana, Burkina Faso with references to Mali, Guinea, Benin, and Niger. For the Southern African region, we have selected South Africa and Zambia. In the central African region, despite the fact that recent developments show a strong appetite for Islamic finance from the private sector in Chad, Cameroon, and an early public initiative from Gabon, countries in this region seem generally indifferent to Islamic finance despite its great potential.

The study briefly outlines the different investment opportunities for Islamic finance in Africa, its financial system, and economic development. These opportunities include unprecedented economic growth in the continent whereby some countries are registering some of the highest growth globally. As the World Bank notes, “Africa could be on the brink of an economic take-off, much like China was 30 years ago, and India 20 years ago.”¹¹ Indeed, Africa has seen what can be termed according to the World Bank’s Africa’s Competitiveness Report 2011 as an “economic resurgence” over the past decade. Similarly, PricewaterhouseCoopers noted that, “Sub-Saharan Africa is experiencing an economic resurgence.”¹² Between 2001 and 2010, gross domestic product growth on the continent averaged 5.2 % annually, and with the exclusion of South Africa, GDP growth in Sub-Saharan Africa remained robust. Despite a weaker than expected global economy, with a number of major countries showing mixed performances, growth prospects for Africa remained positive through 2013–14 and the region’s GDP growth is projected to increase to 5.2 % in 2015–16 and 5.3 % in 2017. After slowing to 3.4 % in 2015, economic growth is expected according to World Bank to pick up to 4.2 % in 2016 and to 4.7 % in 2017–18.¹³ Africa’s regional growth is supported by strong public investment in infrastructure, increased agricultural production, and a buoyant services sector. Overall, Sub-Saharan Africa is forecast to remain one of the fastest growing regions.¹⁴ Similarly, the International Monetary Fund (IMF)’s latest Regional Economic Outlook for Sub-Saharan Africa projects regional GDP growth to pick up from approximately 5 % in 2013–14 to 5¾ % in 2015.¹⁵

Africa’s spectacular and steady economic growth in the last decade and its positive outlook in the short, medium, and long term are widely acknowledged by multilateral institutions such as the World Bank,¹⁶ the IMF,¹⁷ the United Nations,¹⁸ the World Trade Organisation,¹⁹ and the African Development Bank.²⁰ It is also recognised by international financial conglomerates such as Citigroup Bank,²¹ Credit Suisse,²² Goldman Sachs,²³ Merrill Lynch,²⁴ Société Générale,²⁵ Crédit Agricole,²⁶ European Investment Bank (EIB),²⁷ Standard Bank,²⁸ Renaissance Capital,²⁹ Deutsche Bank,³⁰ or by rating agencies such as Standard and Poor’s,³¹ and Moody’s.³² It has also been advocated by leading advisory and consultancy firms such as McKinsey,³³ Ernst & Young,³⁴ KPMG,³⁵ PricewaterhouseCoopers,³⁶ Accenture,³⁷ Deloitte,³⁸ the Boston Consulta...