Cairo (BZZ) – Following the overthrow of President Hosni Mubarak, prospects are rising for Egypt to become a new hub for the booming Islamic finance.
Although Egypt is considered the birthplace of Islamic finance, its growth has lagged due to past corruption scandals. Under Mubarak’s 30-year rule, the country sought to enforce a more secular financial system.
According to a 2009 report by consulting firm McKinsey, Islamic banking only accounts for 3 to 4 percent of Egypt’s $193 billion banking industry. That compares with 46 percent in the United Arab Emirates. But after Mubarak’s ouster in a popular revolution two months ago, prospects are rising for the country to become another thriving center of Islamic finance.
„In a post-Mubarak era, the urgency of rebuilding and changing things will clash with the absence of resources and lack of money,“ said Ibrahim Warde, adjunct professor at The Fletcher School of Diplomacy at Tufts University.
That will likely present an opportunity for Islamic finance houses in the Gulf region, which now serves as the industry’s global hub.
„Egypt is going to look towards the Gulf for money and it’s going to have to offer Islamic options to maximize investments,“ he said.
According to data from Bankscope and Thomson Reuters, Egypt could see Islamic finance assets grow to $10 billion in 2013 from $6 billion in 2007.
There’s also keen interest in Egypt for Islamic insurance, or takaful, which makes up 5 percent of Egypt’s $1.45 billion insurance market but is expected to grow dramatically, according to a March report by Islamic consultancy BMB Islamic.
Islamic banking, which began almost three decades ago, has made substantial growth and attracted the attention of investors and bankers across the world.
With estimated 300 Islamic banks and financial institutions worldwide, the industry expands by 15-20 percent a year and entered recently new markets from Australia to South Africa.