The African Development Bank (AfDB) has recently drafted a report aiming at developing Islamic banking services in North Africa, analyzing the reasons for which they find it hard to develop, studying future perspectives and to what extent they would contribute to economic development.
There is a considerable need in resources for the financing of projects in North Africa given the under-development of infrastructure in the region. To this day, 24 Islamic finance projects operations have been approved in North Africa, together totalling 2.4 billion dollars. Regarding Tunisia, national political factors have often hampered the development of Islamic banking services.
With the recent advent of the Islamist party Ennahda to power, its legitimization could be considered as a favorable evolution for Islamic finance. In fact Tunisia comes 23rd in world rankings of Sharia-compliant assets, with 0.8 billion dollars out of 36 billion dollars in total assets.
AfDB experts explain the reasons for the under-development of Islamic banking services by the limited development of bank activities, the little familiarity of potential customers with the services of Islamic banking services, and the lack of state support. In Tunisia there exists no complete Islamic banking law with regards to requirements relative to the approval of Islamic banks.
Examples of Islamic-financed projects that Tunisia greatly benefited from include real estate, infrastructure, and energy. Most of this financing was in the form of istisna’a contracts, in which the investor pays for equipment, manpower and project providers. The biggest project in Tunisia is a Bahrain-like financial hub in the Raoued area of Tunis as the first offshore financial and banking center in North Africa. This ambitious project aims at creating 16,000 jobs and accommodating 110,000 inhabitants. It will begin on November 11th, 2011.
The report concludes by mentioning that there is room for banking services that follow Islamic finance in North Africa. They could contribute a more inclusive development model that insures social cohesion and favors an equal sharing of risks and benefits between project providers and resource users.