Challenged by a lack of liquidity, foreign currencies and foreign direct investments, Zimbabwe sees Islamic finance as part of the solution to its macroeconomic issues that are hitting hard on its development. MARC ROUSSOT reports.
Although Muslims represent fewer than 1% of the population, Zimbabwe is on its way to accommodating Islamic finance in a bid to boost its economic growth which recorded 0.7% back in 2016 according to the World Bank.
A month ago, Malaysia-based International Center for Education in Islamic Finance handed over to the Reserve Bank of Zimbabwe a proposal containing a roadmap on how Islamic finance can be introduced in the country, covering Islamic banking, Takaful and Sukuk.
In parallel, Murozvi Capital, an investment banking and Islamic finance advisory firm, wrote a paper on Islamic finance and how the country’s economy can benefit from the development of the industry. “We are looking at Islamic finance from a practical and economic point of view rather than from a religious perspective. The goal is to demonstrate how it can help Zimbabwe finance projects, for instance,” explains Tonderai Pasipamire, the executive director of Murozvi Capital.
From informal talks initiated back in November 2015 with the Reserve Bank of Zimbabwe and the Zimbabwe Investment Authority, the country’s investment promotion body, to official discussions that started in April 2016, Murozvi Capital, in partnership with AWAL Consulting, has been a strong advocate of the industry over the past few years.
Having conducted a feasibility study on introducing Islamic finance in Zimbabwe, Murozvi Capital quickly realized that financial institutions including Commercial Bank of Zimbabwe, MBCA Bank Zimbabwe, Steward Bank, the Bankers Association of Zimbabwe and Zimbabwe Stock Exchange were all very keen to tap Islamic finance but could not move forward as long as proper regulations were not in place.
The Insurance and Pensions Commission also demonstrated strong interest for the industry as accommodating Takaful would potentially attract new players, hence increasing competition in the insurance market that currently counts only 11 life insurance companies.
After months of discussions, the Ministry of Finance and the Reserve Bank of Zimbabwe identified a few projects that could be funded Islamically, including the construction of schools and a dam as well as a fishing project. “The goal is to help them understand how Islamic finance works,” explains Pasipamire. However, for these projects to be financed in a Shariah compliant manner, a new regulation has to be passed first.
How long is it going to take? Difficult to say, as Zimbabwe is going through an unexpected political transition after the fall of Robert Mugabe who ruled the country for 30 years.
“If the big banks are in favor of Islamic finance, if they see Islamic finance as an opportunity to widen their portfolio, it might be a swift move to see the industry accommodated in the country,” says Pasipamire.