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Saturday, 11 August 2007

Islamic finance yet to make a mark in Egypt


CAIRO: Islamic banking has taken off in the Gulf and is spreading in Europe and Asia, but in Egypt, the most populous Arab country, it has hardly made a dent. The growing religious sentiment among Muslims that has propelled Islamic finance, estimated to have assets of $500 billion, has not lifted the industry in Egypt, where Islamic banks have a market share of only about five per cent. Islamic bankers in Egypt say the Egyptian government has not been as keen to promote the industry as Gulf countries, or even Britain. "There is a cynicism toward Islamic finance in Egypt, and the bureaucracy may look at it as part of Islamic fundamentalism," said Mushtak Parker, editor of the Islamic Banker magazine. Elsewhere, the industry is estimated to be growing 15pc a year, and large Western banks such as HSBC and Barclays have set up Islamic banking arms. Even Japan, where about one person in 2,000 is Muslim, has said it is planning to sell Islamic bonds. In Egypt, where the first modern experiments in Islamic banking took place in the 1960s, Islamic banks say it is difficult to compete in a market that has been dominated by large state-owned lenders. "Islamic banks in Egypt can get stuck and they can exercise losses," said Pacinthe Fahmy, a consultant at Egyptian-Saudi Finance Bank. "The cost of finance is too high due to the high level of liquidity." Islamic investment companies promising returns far above local interest rates collapsed at that time, causing millions of Egyptians to lose their savings. "It was a social crisis, and the image of Islamic banks still is not great," said Radwa El-Swaify, banking analyst at Beltone Financial in Cairo. Unless more Gulf lenders such as Abu Dhabi Islamic Bank can enter Egypt through acquisitions, analysts say Egypt's potential for Islamic banking will remain largely untapped unless official attitudes change. Abu Dhabi Islamic Bank, seeking a toe in the market, paid 159 million pounds ($28m) in July for 51pc of Egypt's National Bank for Development. - (GDN, 10 Aug 07)

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