Ethiopia

Islamic finance taking shape

In #Ethiopia, Muslim members of the business community are and had been severely underserved by the nation’s financial industry. This seemed to be changing in 2011 with the enactment of the nation’s first interest-free banking directive by the National Bank of Ethiopia. However, the directive only authorized interest-free banking window in the setup of a conventional banking system and not a full-fledged Islamic bank. Exactly six years later, three potential full-fledged Islamic banks have been established. The three have officially started selling shares while unofficially at least two more banks are said to be in the pipeline to take part in the interest-free banking game. This will bring the total number of new entrants to five.

Why #Ethiopia wants to develop Islamic finance

Ethiopia's central bank aims to develop Islamic finance to help expand financial access and inclusion. The country has one of the highest economic growth rates in Africa, but relies heavily on an agricultural sector that employs three-quarters of the workforce. According to Getahun Nana, Vice Governor of the National Bank of Ethiopia, the government wants to industrialize its economy but this requires sustaining investment rates of almost 40% of GDP over the next five years. Islamic finance could help in this endeavor, so the central bank is conducting a study to determine the demand for sharia compliant financial products. Islamic finance is still new in Ethiopia. Currently 8 out of 18 financial institutions offer sharia compliant products via Islamic windows but they have so far mobilized less than 1% of total deposits.

Ibdar Bank’s landmark $100m lease agreement with Ethiopian Airlines pays first dividend

Bahrain-based Ibdar Bank successfully concludes the structuring of a 12-year agreement expiring in 2026 for acquiring four brand new Bombardier Q400 Next Gen aircrafts and leasing them to the Ethiopian Airlines. The agreement that was structured under a joint venture with Dubai-based operating lessor Palma Holding, includes options for an additional four Q400 NextGen aircraft, which Ibdar Bank intends to exercise in the near future. Valued at USD 100 million, Ibdar Bank contributed as investor with USD 22 million, while an amount of USD 78 million was secured through a funding agreement with Canada’s Export Credit Agency “EDC”.

UN, World Bank and Islamic Development Bank commit 8 billion dollars in Major New Development Initiative for the Horn of Africa

Leaders of global and regional institutions pledge political support and major new financial assistance for countries in the region, totaling more than $8 billion over the coming years. UN Secretary-General Ban Ki-moon, the World Bank Group (WBG) President, Jim Yong Kim, as well as the President of the Islamic Development Bank Group and high level representatives of the African Union Commission, the European Union, the African Development Bank, and Intergovernmental Agency for Development (IGAD) are combining forces to promote stability and development in the Horn of Africa. The initiative covers the eight countries in the Horn of Africa -- Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan, and Uganda.

Qatar firms explore investment opportunities in Ethiopia

Qatar is exploring investment opportunities in Ethiopia’s banking, insurance, real-estate development, and health and communication sectors. This was announced by a Qatari businessmen delegation, chaired by Sheikh Dr Khalid bin Thani bin Abdullah al-Thani, chairman of Ezdan Holding Group. Dr Mulatto Shuma, president of Ethiopia, highlighted government’s readiness to offer all possible support to encourage foreign investment in Ethiopia by offering facilities and incentives as well as adopting a policy that protects investments in the country. Other members of the delegation included Ali Abdulrahman al-Hashemi, delegated member of Mackeen Holding Company; Ali Ibrahim Abdulghani, CEO of Qatari Islamic Insurance Company; and Kyle White Hill, CEO of Vodafone Qatar.

Islamic Banks to enter financial sector in Ethiopia

Finally responding to a strong public demand, the National Bank of Ethiopia (NBE) is about to approve a directive that paves the way for the establishment of Islamic banks. The directive also opens doors for currently operational commercial banks to create an interest-free banking wing. To accommodate muslims, who are by Sharia’h – Islamic law – prohibited from taking or giving interest, commercial banks are currently offering zero interest. However, the sector will, according to Prime Minister Meles Zenawi, remain closed from foreign banks involvement. After the establishment of the first private commercial bank in Dubai, more than fifty interest-free banks were established in Muslim countries and as well as in European countries such as Denmark, Luxembourg, Switzerland and the UK.

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