How Islamic Finance Can Support Gambia’s Economic Development

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Tuesday, April 12, 2022 / 10:22 AM / by Bukola Akinyele-Yisau for WebTV / Header image credit: CIBE

Tapping in Islamic finance will attract foreign direct investment to The Gambia and contribute significantly to its economic development. It is one of the main instruments used in asset generation, focusing only on the real economy. Mr. Governor of the Central Bank of The Gambia, Boo Saidy,made this point at the recent 8and African Islamic Finance Summit in Banjul. According to him, it is a suitable option for Muslims and non-Muslims alike, and the non-speculative asset-based nature of the Islamic banking and finance industry.

He said Islamic finance has evolved in The Gambia and is still a work in progress. In January 2022, The Gambia launched its National Financial Inclusion Strategy to widen the frontier of access to finance due to lack of lenders for its economic growth and development.

According to him, limited access to finance is a significant barrier to growth and an important indicator of the ease of doing business in developing countries.

He said, “Globally, 1.7 billion individuals and businesses lack access to finance. Islamic finance is expected to bridge the financial gap for women, youth and small and medium enterprises with Islamic finance compliant products and services”. Mr. Saidy explained that the principles of Islamic finance are based on the prohibition of riba, also known as interest, gambling and speculative trading. At the same time, it encourages partnership and risk sharing and contracts between financial institutions and their customers.

Due to its underlying principles, it has gained worldwide attention and is seen as a stable and ethical alternative to the conventional financial system, regardless of religion, he said. Islamic finance requires financial products to be structured to comply with Shariah and executed through the bulk purchase contract based on an underlying asset.

The underlying principle of Islamic finance is the distribution of wealth by regulating market activities.

He highlighted the fundamental characteristics of Islamic finance:

  • The principles of justice are an essential requirement for any type of Islamic financing
  • Funding of Islamic finance products is limited to valuable goods and services and refrains from funding harmful activities
  • The ethical and moral consideration of Islamic products and the essential principle is that money is not a gainful asset in Islam

“An Islamic microfinance aims to achieve the social objectives of Islam by providing financial services and technical assistance to low-income, vulnerable and marginalized micro-small enterprises.”

He informed the stakeholders that the Gambian government is partnering with the IDB to develop the country’s necessary infrastructure for Islamic banking. In 1997, the first Islamic institution, the Arab Gambia Islamic bbank, AGIB, was created through an equity investment, including the Islamic Development Bank.

In a decade, the bank has grown across the country with products such as Murabaha,
Mudaraba, Musharakahand wakala. He said the Central Bank of The Gambia in 2017 developed an Islamic financial instrument for investment called Sukuk As-Salam which has gained popularity and attracted investment from both Islamic and conventional banks.

In his address, the Managing Director of the Islamic Corporation for Private Sector Development, Mr. Ayman Sejiny, said that Islamic finance has much to offer economies as an alternative finance that promotes sustainable development. He said it also creates an enabling environment for economic and social development.

He noted that as Africa rapidly transforms, the continent is harnessing immense potential to become the new power in the global economy. The ICD is present in over 20 African countries, mandated to provide Sharia claims, capital and provide knowledge and partnerships to serve all private sector actors in member countries.

The ICD boss added that Islamic finance is one of the fastest growing segments of the global financial industry, which will continue to create value by facilitating the growth of bio-economic sectors and the infrastructure needed to support business activities.

Mr. Ali Oseka, the representative of the Honorary Council of Indonesia in The Gambia, made his remarks and said that Indonesia is the most populous Islamic country with over 230 million Muslims. At present, Islamic finance represents 37% of its banking industry. Indonesia and Brunei have emerged as the fastest growing market for issuing Sukuk, Sharia-compliant bonds, among other ethical investments. He said that any excellent structure with a clear corporate governance framework is the main factor in creating an effective Islamic financial institution.

“The main principles of all corporate governance are accountability, transparency and reliability. Necessary training and encouraging continuous professional development among Shariah investors.”

the Minister Energy and Oil, Fafa Sanyang, said that it should be noted that Al-Huda CIBE participated in the summit to raise awareness and improve knowledge on Islamic finance. According to him, the Islamic finance industry is growing exponentially and is a viable alternative to interest-based financing.

He said investing in the Islamic finance industry will lead to more foreign investment, improve global connectivity, enhance job creation, socio-economic development and poverty reduction.

According to him, oil and gas assets fit well with Islamic finance, and the sector can create Sharia-compliant investment avenues for the Islamic finance industry.

The Managing Director of Al-Huda Center for Islamic Banking and Finance, Mr. Zubair, said that the total volume of Islamic finance assets is around 3.8 billion dollars and that 80% of the Islamic finance industry belongs to Islamic banking segment, the second component of Islamic finance. the financial industry is Sukuk and the Islamic capital market. In contrast, the third component is Takaful; the fourth component is Islamic microfinance. The fifth is about Islamic indices and the sixth is a new emerging component of Islamic fintech.

According to him, The Gambia has a unique Islamic microfinance institution compared to Nigeria. The Gambia uses Islamic microfinance for agriculture and rice value chain development for livestock development.

the Minister of Commerce, Industry, Regional Integration and Employment of The Gambia, Hon. Abdoulie Jobewho represented the President of The Gambia, Adama Barrow, reaffirmed the government’s commitment to exploring the untapped African financial market for the socio-economic benefit of the entire continent and The Gambia.


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