Islamic Finance Gaining Momentum In Mauritius

It is an alternative financial system reflecting financial transactions and activities which are in accordance with the practices and principles of Islamic law, known as Shari’ah, which is a set of rules, practices and principles governing all aspects of life of those who have submitted themselves to Islam. It is however open to everyone.

“The general objective of the Islamic financial system is to promote human wellbeing, adopt measures for establishing justice, equity, fairness and prohibiting harm and unproductive activities,” Hussein Rassool, product development specialist in Islamic Finance at Cim Global Business told The Independent.

CIM Global Business also launched a Shari’ah-compliant platform in April.

Mauritius Leasing, which recently amalgamated with Bramer Bank, was the first leasing company to come up with an Islamic leasing product under the name ‘Ijarah’ in April 2009, while HSBC Bank was the first to incorporate Islamic banking on the island.

“Ijarah offers an alternative to conventional leasing and is the ultimate form of Riba (interest) free asset-backed financing. It combines modern credit and financing techniques with traditional risk and reward sharing concepts and business ethics,” said Ashraf Esmael, acting chief executive officer Bramer Bank.

“Aside from being Shari’ah compliant, Ijarah’s features are simple to understand and readily accepted by the market since the fundamentals are clearly aligned with Islamic principles,” he added.

Islamic finance differentiates itself from other types of banking in that the provider of capital and user of capital must share the profits and risks of the enterprise for which money is advanced. Charging of interest on money is also prohibited since in Islam, money is only a means of payment; unlike a commodity, on which interest may be levied.

“Investment should not support practices and products that are forbidden, such as alcohol, pork, pornography, gambling, casinos, interest bearing instruments, drugs, bribery, money laundering and environmental damage. Speculation (such as selling material to be acquired) is not allowed either,” Rassool added.

Concerning Islamic Finance’s scope in increasingly challenging economic conditions, Rassool pointed out that “the downturn fuelled by the crisis has clearly proved that a banking system based on interest does not have positive outcomes.

The Islamic Finance segment has resisted sturdily to the uncertainty wave and has been budding in various countries. Africa represents a very important market for this.”

According to Esmael: “Islamic finance products in Mauritius remain a niche product within a niche market. To expand this market remaining roadblocks from a legal, regulatory and fiscal perspective must be eliminated.”

“Operators must also be encouraged to embrace this line of business. We need to develop further capacity in terms of technical and commercial skills so that these products and services can be brought to market,” explained Esmael.

“It should not only target Muslims but a wider range of customers with particular emphasis on quality of service and competitiveness of the products themselves. With the right conditions, there is scope for broadening the product range in Mauritius,” he said.

The CEO added, “There is a wide scope of opportunities in the region, especially in Africa which remains an untapped market.”

“About 50 per cent of the African population is Muslim and more than 75 per cent of the African population is unbanked. This clearly represents a great opportunity for Islamic Finance on the continent and Bramer Bank has a competitive edge with its experience in Islamic products,” he added.