Egypt’s Islamic Finance Skyrockets to $19.38B in First Half of 2023

In a display of unwavering financial progress, Islamic finance in Egypt has reported an impressive surge in the first half of 2023. With the figure touching EGP 600bn, Egypt is riding a wave of a robust Islamic finance ecosystem, revealing a booming market with an array of key players and diverse products.

Banking at the Helm: The Lion’s Share

Banks have contributed immensely to this surge, accounting for a colossal EGP 562bn of the total. Furthermore, Sukuk issuances — financial certificates that comply with Islamic law — added another EGP 60bn, affirming the expansive scope of Islamic finance in Egypt.

Staggering Growth and Market Penetration

Mohamed El-Beltagy, the astute President of the Egyptian Islamic Finance Association, shed light on this upward trajectory in a recent report. Notably, Islamic banking’s footprint in the Egyptian market stands at 5% — an augmentation of around EGP 120bn in June 2023 alone. This represents a substantial 27% growth since June 2022.

Key Players in the Islamic Banking Landscape

The Islamic banking realm in Egypt is represented by three stalwarts: Faisal Islamic Bank of Egypt, Al Baraka Bank Egypt, and Abu Dhabi Islamic Bank. Further diversity in the market comes from 11 Islamic branches of conventional banks, catering to an expansive clientele of approximately 3.5 million.

As of June 2023, Egypt boasts 256 Islamic branches, marking an increase of 11 from the previous year. Significantly, these branches encompass 5.1% of the entire banking sector, a testament to the burgeoning presence of Islamic finance in Egypt.

Market Leaders and Their Stakes

• Faisal Islamic Bank of Egypt: Tops the chart with an impressive turnover of EGP 170bn, capturing 30.1% of the market.
• Abu Dhabi Islamic Bank: Follows closely, with a turnover of EGP 137.6bn, holding a 24.5% market share.
• Banque Misr for Islamic Transactions: Secures the third spot, turning over EGP 118bn, which equates to a 21% market share.
• Al Baraka Bank: Ranks fourth with a turnover of EGP 93.8bn, commanding a 16.7% market share.
• The United Bank: Though at the fifth spot, it’s noteworthy with its EGP 14.4bn turnover, translating to a 2.6% market share.

Significant Financial Metrics

Islamic deposits as of June 2023 stood at an astounding EGP 425bn, about 6% of the total deposits in Egypt’s banking sector. This showcases an increase of EGP 64bn, or an 18% growth since June 2022. Meanwhile, financing rooted in Islamic principles touched EGP 450.6bn, mirroring about 5% of the total loan portfolio in the banking arena. This represents a hefty EGP 102bn surge, with a growth rate of 29.3%.

Product Diversification and Challenges Ahead

El-Beltagy accentuated the innovation and growth of over 65 tailor-made Islamic banking products to cater to diverse client needs. However, the market still holds potential for the evolution of Sharia-compliant products for both individuals and the corporate sphere, including SMEs.

The Egyptian Islamic Finance Association has identified a significant challenge: developing human resources proficient in delivering these specialized products. To counteract this, they’re offering advanced degrees in Islamic finance and partnering with esteemed organizations like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) to enhance the skill sets of Islamic banking professionals.

Guidance from the Apex

The Central Bank of Egypt, recognizing the potential and nuances of Islamic finance, has rolled out directives for all Islamic banks and those with Islamic branches. These banks are now required to have a dedicated Sharia board, independent financial hubs for these branches, and separate departments to oversee the application and implementation of Islamic products.

Egypt’s burgeoning Islamic finance sector is a testament to the country’s adaptability, resilience, and financial foresight. With regulatory support and innovative offerings, the nation is poised to lead the Islamic finance domain in the years to come.