Islamic-focused banks in Africa have posted robust growth in deposits and profits in the last six to 12 months and this performance is expected to continue, according to Moody's Investor Service.
Islamic banks, as well as non-Islamic lenders with units offering shariah-compliant products, often operate in challenging conditions in Africa, and their recent performance proves their resilience, Moody's said in its Sept. 16 report.
There are further opportunities as Africa's large Muslim population can underpin future growth. This population, which is largely unbanked or underserved, will "continue to provide a solid foundation in which Islamic banking assets, and thus earnings, can grow rapidly," the report said.
Standout numbers
The report cited the impressive performance of Islamic-focused banks based in Nigeria and South Africa, and said this trend is expected to continue for the next 12 to 18 months.
The deposit growth rate at Nigeria's only Islamic bank, Jaiz Bank PLC, was 25% in 2018, beating the Nigerian banking system's 12% growth in the year, according to Moody's. Jaiz's net income also grew 55% over the same period.
Also in Nigeria, Sterling Bank PLC said its Islamic unit, or window, posted a 24% rise in 2019 first-half profit compared to the prior-year period, despite a 16% contraction of its total assets. Sterling bank said the window is a source of asset growth for the company and it expects the segment to resume said growth over the next 12 to 18 months, according to the report.
For the financial year ending June 2019, Islamic transactional deposits were the fastest-growing deposit category at South Africa's First National Bank, a unit of FirstRand Ltd., Moody's said. These deposits grew 35% over the 12 months ending June, while commercial deposits were second fastest with a 16% growth over the same period.
The report said Al Baraka Bank, an Islamic bank in South Africa, recorded a 12.4% increase in net income in the first half of 2019 compared to the same period a year earlier. It also issued a 200 million rand sukuk in late 2018.
Islamic bonds
Moody's said it expects to see further sovereign sukuk issuance in the next 18 months, despite structural constraints. It said Nigeria, Ivory Coast and South Africa are the biggest issuers of sukuk in Africa.
However, African issuances of sukuk only comprise 0.5% of the global total of outstanding Islamic bonds, according to the report.
As of Sept. 16, US$1 was equivalent to 14.61 South African rand.
