Islamic Finance Down in Post-Mursi Egypt
SEPTEMBER 2, 2013: With the fall of the Muslim Brotherhood, Islamic finance has lost strong political support in the most populous Arab nation. But economic pressures mean the industry remains likely to grow and the country will eventually start issuing Islamic bonds.
Islamic finance, which obeys religious principles such as a ban on interest payments, was neglected and even discouraged by authorities for ideological reasons in the three decades before the revolution which ousted President Hosni Mubarak in 2011.
The market share of Islamic banks in Egypt is only about 5 per cent, well below estimates of roughly 25 per cent in the developed Arab economies of the Gulf.
That seemed about to change when Islamist President Mohamed Mursi, a member of the Muslim Brotherhood, took power in June 2012. The Brotherhood made expanding Islamic finance one of its top economic policy planks, promising to issue sovereign sukuk, introduce rules to facilitate Islamic fund-raising by companies, and reform the operations of Islamic endowments.
This political backing has disappeared with the ouster of Mursi in an army-backed uprising in early July; the interim government which is to serve until elections early next year has much less fondness for Islamic finance.
But underlying demand among Egypt’s mostly Muslim population of 84 million, the country’s need to develop what financing sources it can, and the growing role of wealthy Arab countries in the Egyptian economy mean the sector may still grow.
“Sukuk will be available in Egypt particularly because they are the sole instrument used by some investors in the Gulf Cooperation Council and southeast Asia,” Sherif Sami, the new head of the Egyptian Financial Supervisory Authority, told Reuters last week.
Sami stressed his body would only handle the technical side of sukuk issues, and any decision to push forward with legal changes to facilitate sukuk would be political.
The technocrats who dominate Egypt’s new economic policy team, many of them with experience from the Mubarak era, have shown little personal interest in Islamic finance.
Source: Trade Arabia