ISSN 2330-717X

Tunisia Aims To Become Islamic Finance Center

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By Mohamed El Hedef

With a newly liberated political atmosphere and a developing free market, Tunisia is looking to become a centre of Islamic finance in the Maghreb.

Islamic banking was the focus of a recent forum in Gammarth where experts, bankers and political leaders discussed ways Tunisia could lead the region in expanding economic opportunities. The July 15th-16th conference, organised by the General Council for Islamic Banks and Financial Institutions (CIBAFI), also tackled issues of innovation and training in the emerging field.

Tunisia
Tunisia

Tunisian Finance Minister Jelloul Ayed told attendees that currently 96% of financial resources from Islamic banking are invested outside Muslim states, something he considered a lost opportunity.

He also explained that Tunisia could turn to Islamic finance as a source of funds for its immediate needs, estimated at 30 to 40 billion dollars over the next five years. Tunisia’s current loans from the Islamic Development Bank total about 500 million dinars across several sectors, Ayed said.

In this regard, the minister announced that Tunisian authorities were looking to develop a legal framework to regulate the sector. He also highlighted plans to create a sovereign wealth fund called “The Future Generations Fund”.

On the Maghreb level, Ayed underscored that efforts by Maghreb countries toward integration must continue and be intensified, ultimately encompassing all financial and economic fields. He added that the integration to which peoples of the Maghreb aspire provided greater opportunities for growth for the Maghreb region, which has about 85 million inhabitants and a GDP approaching $400 billion. Some studies have estimated that the lack of integration costs the Maghreb 2% of annual GDP growth.

“If we know that one point in growth, for example, in Tunisia can provide 20,000 citizens with jobs on average in the year, this country has lost about 400,00 jobs over the last ten years,” the minister said. Islamic finance represents an important opportunity to contribute to the financing needs of the Maghreb and assist it in establishing joint projects, according to Hussein Mohamed Al Meeza, Vice Chairman of Al Salam Bank in Algeria. He also pointed to the strength of Islamic banks during economic shocks and financial crises.

But the reality of Islamic banking does not seem to match this rosy image, as it faces serious challenges, according to CIBAFI Secretary-General Dr Ezzedine Khoja. He said Islamic finance must deal with the different schools of Islamic law, as well as the lack of international standards for Islamic financial institutions, such as the “Basel” standard, despite the existence of an accounting and auditing body at these institutions.

Most Islamic banks focus on finance rather than direct investment, with 75% of Islamic commercial bank assets invested in short-term products, and the proportion of long-term direct investment not exceeding 2%, according to Khoja.

Globalisation also poses a challenge with increasingly intense competition, as traditional Arab and foreign banks enter the Islamic investment market, in addition to the challenges in terms of keeping pace with changing technology.

The weak capacity of some Islamic banks to innovate, coupled with the lack of trained human resources, results in inability to manage liquidity with the required efficacy on the one hand and to reassure and attract customers on the other, explained Mohamed Habib Kchaou, Director-General of the Centre for Investment and Training in Islamic Finance (CAFI) in Tunisia. He added that CAFI plans to offer an Islamic banking degree next September.

Magharebia

Magharebia

The Magharebia web site is sponsored by the United States Africa Command, the military command responsible for supporting and enhancing US efforts to promote stability, co-operation and prosperity in the region.

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