Cairo: One of the biggest commercial banks in Egypt, AlexBank, has announced that it is likely to introduce Islamic financial services next year in the month of April. However, it is unclear that how the bank will operate amid the political divisions existing in the country.
Banking industry experts believe that there is a clear way for fast growth of Islamic finance in Egypt after the ouster of President Hosni Mubarak last year who was against Islamic finance system in the country due to ideological differences.
The experts demanded the existence of a regulatory framework in the country for the growth of Islamic finance as the basic regulatory decisions have not been made yet even after the ouster of Mubarak. The Islamic regulations are likely to take more months to be decided as the incumbent government and political parties are still undecided about what form of Islamic jurisprudence Egypt should adopt while the country is going through transition phase towards democracy.
The population of Egypt is over 80 million that makes it potentially an attractive market for Islamic finance which follows religious principles such as a ban on interest payments. Egypt happens to be a pioneer in developing the Islamic finance industry two decades ago but a scandal over money management firms halted its progress in the country.
According to the Head of the Egyptian Society for Islamic Finance, Mohamed El-Beltagy, there are 14 banks in Egypt which have Islamic banking licenses including three full-fledged Islamic banks, such as Faisal Islamic Bank of Egypt and several others which use Islamic windows such as National Bank of Egypt and Ahli United Bank, part of Bahrain's Ahli United Bank group.
The latest data by central bank shows that total assets of the entire banking sector are about 1.3 trillion pounds whereas Egypt's conventional banking industry has assets of 120 billion Egyptian pounds ($19.9 billion). Ernst & Young consultants have estimated that Islamic banks account for over a quarter of assets in the Gulf's commercial banking market.
Al Watany Bank of Egypt, Naeem Financial and Banque du Caire, had launched some Islamic mutual funds last year but only eight products available in market are Islamic out of 72 mutual funds.
The Head of Retail Banking, Bassel Rahmy, said that AlexBank, majority owned by Italy's Intesa Sanpaolo, is planning to introduce Islamic consumer banking products across the country at its ten out of 200 branches.
United Bank, majority owned by the central bank, has also announced to start possible Islamic operations by the end of this year.
A prominent Dubai-based Islamic scholar, Sheikh Hussein Hamid Hassan, has revealed that the Egyptian government is likely to issue its first Sukuk (Islamic bonds) and raise about $2 billion through it. Private Egyptian companies will ultimately be encouraged for Sukuk sales by this step of the government.
There is a dire need of a legal framework in Egypt to attract investors and expand the Islamic finance industry but so far, the progress has been slow.
Bassel Rahmy of AlexBank informed, “Commercial bankers have been discussing the subject with the central bank governor, who has indicated regulations would be prepared this year. The Egyptian Financial Supervisory Authority (EFSA) has confirmed it is drafting rules to facilitate corporate sukuk issues.”
He expressed hoped that the proper setup for Islamic finance will be in-place soon in the country and Islamic banking will flourish in Egypt.