In this article, we will have a brief look into Islamic Finance in Egypt. In addition, we will talk about the main the steps government took in order to develop the sector in the country.
Islamic finance differs in key ways from conventional finance
Islamic finance follows an ethical framework for economic and social justice. We define it as “Shariah-compliant”. The concept of Islamic Banking developed as a result of the religious prohibition of the payment or receipt of interest.
Islamic banking adheres to a code of ethics that promotes economic and social justice. It emerged as a result of the religious prohibition on paying or receiving interest. Islamic banking’s essential concepts date back over a thousand four hundred years.
Islamic finance in Egypt
As the Egyptian Civil Code intends to be consistent with Islamic shariah, there is no legislated definition of what defines Islamic finance or an Islamic financial instrument. It is essential to mention that Sukuk and green bonds are among several new financial instruments that are going to appear in the Egyptian market.
The Financial Regulatory Authority is the one who controls the Takaful industry. Furthermore, there are takaful insurance businesses with licenses functioning in Egypt. In order to support takaful insurance, the authority will amend Law No. 10 of 1981 (the Insurance Law).
Egypt’s Financial Regulatory Authority approved the first issue of Sukuk, or Islamic bonds, by a subsidiary of Talaat Mostafa Group. It is Egypt’s largest listed real estate developer, in April 2020, worth 2 billion Egyptian pounds ($127 million). The Sukuk issued by the subsidiary Arab Company for Projects and Urban Development will be available for trade and expedited payment, but not for the stock exchange. The new Sukuk will be valid for 57 months, from now until the end of 2024.
Additionally, Egypt signed its first $2 billion conventional and Islamic financing loan to help the local economy in September 2020. The main objective of the loan is to “finance the state’s general budget and assist the Egyptian economy. This loan will contribute to maintaining its robust course, especially in the face of prevailing global market fluctuations. The facility increased from $1.5 billion to $2 billion due to an “increased demand for subscription,” according to the government.
Conclusion
Islamic banking and finance in Egypt are growing. According to the Egyptian Association for Islamic Finance, the volume of Islamic banking in Egypt reached around EGP 390 billion in June 2021. This number represents 5.1% of the Egyptian banking sector, up EGP 42.4 billion (12.2 per cent) from March 2020.
More than 50 Islamic banking products and services have been developed in the Egyptian market to fulfil the needs of customers. However, the market still needs to develop more Sharia-compliant products, whether for the individual or corporate sectors.
The AAOIFI and the IFSB proposals have made significant progress, but there is still much work to be done in Egypt. By focusing first on standard practices for the largest marketable instruments, Egypt can effectively take a project to produce more common Shariah standards under its wing.
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