The Islamic Globe has learned that First National Bank of South Africa will be expanding into in Zambia, Nigeria and Tanzania in the coming months in a bid to tap emerging opportunities in Islamic finance across sub-Sahara Africa.
The expansion is part of the bank's strategy to maintain the 25% year-on-year growth of its Islamic banking window known as FNB Islamic Finance. The window was opened in 2005 with just two employees, but now employs 50 people.
"For seven years, the growth has been absolutely phenomenal," Patel Ebi (pictured) CEO of FNB Islamic Finance told The Islamic Globe.
FNB will be exporting its Islamic banking expertise from South Africa, the leading Islamic banking hub in sub-Sahara Africa. South Africa is estimated to have up to $1.15bn of Islamic finance assets including Shari'ah compliant listings on the Johannesburg Stock Exchange, cash deposits in non-interest bearing accounts and other financial assets.
FNB runs conventional banking services in eight African countries and Ebi said FNB Islamic Finance will set up operations on the ground in all three of these countries to take advantage of FNB's existing infrastructure.
In South Africa, FNB Islamic Finance said it gets 60% of its business from corporations and 40% from retail customers. Ebi also claimed that 5% of clients are non-Muslims.
It's a brave move by FNB Islamic Finance, as some of the countries it is committing to still have to erect a regulatory framework that can handle Islamic finance. In Zambia, Nigeria and Tanzania, the Islamic finance sector is still run by mandate from the Central Banks - as the governments of these countries have yet to pass legislation to regulate Islamic finance, and this is proving challenging, especially in Nigeria.
But Ebi is bullish on the development of Islamic finance in the continent, citing the significant steps East African nations like Kenya, Tanzania and Uganda have taken to develop the sector and attract inward investments from sovereign wealth funds in Muslim countries and financial institutions in the GCC.
FNB Islamic Finance's expansion will cement its position as Islamic banking leader in South Africa, where Standard bank and Absa also have powerful Islamic banking portfolios.
Pravin Gordhan, South Africa's minister of finance recently claimed the development of Islamic finance in South Africa was critical to the government's expansion strategy to position South Africa as a gateway into Africa. "The treasury envisages South Africa being a central hub for Islamic product development and ensuring the rollout of such products into African markets," he said.
© The Islamic Globe 2011
