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Islamic banking sector worth $16bn in Egypt
Probably one of the most striking things about Islamic finance is the absence of interest in all its forms.
Based on sharia law – and banks are no exception to the rule that mankind must help one another – Islamic finance is considered as a form of ethical lending, where money is moved by relevant parties in a risk-sharing scheme.
It was prevalent throughout the history of the Muslim world and helped lay the foundations for a flourishing civilization. It is only in recent years, however, that formal institutions were established to put Islamic finance into practice on a large scale.
And large scale is precisely what it has become. Currently, the industry is worth more than $1 trillion; however, if it continues to grow at its present rate of 15-20% annually, within the next few years, the $2 trillion mark will easily be reached. This growth will be further enhanced as more countries around the world tap into the potential of this age-old yet revitalized industry.
In Egypt, currently 2.5 million people with accounts in local banks – representing about 20% of the total – are Islamic banking clients, according to Mohamed El-Beltagy, the head of the Egyptian Islamic Finance Association (EIFA). Egyptians are no strangers to the concept, of course, as banks began operating according to sharia law back in the 1960s. In the late 1970’s, Faisal Islamic Bank of Egypt (FIB) was established as the country’s first popular Islamic bank, and became the third one to be created in the world.
At home in Egypt, one-fifth of small and medium sized businesses prefer sharia-compliant products, according to the latest IMF report. This represents an enormous market for Egypt’s Islamic banks to focus on. Of course, for now, big projects are where the big money lies.
One of the largest projects signed last year in Egypt was for a new sugar production plant, with total investments worth EGP2.5 billion that are being financed by 13 different banks, including ADIB.
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