Modibo Mao MAKALOU on Islamic finance: “Mali must adapt its financial system and also the legal and regulatory framework”

Mali is part of the club of countries lagging behind in Islamic finance, according to Modibo Mao Makalou, economist, MBA / International Finance. For its development, it recommends the country to adapt its financial, legal and regulatory instruments. Read instead!

Azalaï Express: 29
Modibo Mao Makalou: The global Islamic financial market recently crossed the $ 2 trillion mark in assets and could reach around $ 3.5 trillion in 2021 according to the World Bank. Islamic finance is a finance whose way of operating is based on the principles of Sharia which presuppose the prohibition of interests, uncertainty, speculation, the prohibition of investing in sectors considered illegal (alcohol, tobacco, betting on games, etc.), as well as as respect for the principle of sharing profits and losses Justice, fairness and transparency are the main values ​​safeguarded by this financial system.

The particularity of the financing of Islamic financial institutions in relation to the needs of very small enterprises (VSE) and small and medium-sized enterprises (SMEs) lies essentially in three aspects: 1) they promote participation; 2) create a partnership that obliges both parties to take risks together by sharing losses and profits; 3) and use alternative financing methods little known by conventional commercial banks.

What is the current state of Islamic finance in Mali and what can be the share of this finance in the financial sector nationwide?

Mali is part of the still small club of African countries to use Islamic finance even though the proportions are still quite modest to this day. The country launched an Islamic bond issue, sukuk, on the WAEMU capital market in 2018. The deal consisted of raising FCFA 150 billion from the general public and institutional investors. Through this exit from the sukuk market, Mali has become the fourth country in the West African Economic and Monetary Union (UEMOA) to issue Islamic bonds, after Togo, Ivory Coast and Senegal.

How can we explain that in Mali, a country with a large Muslim majority, Islamic finance does not have an adequate boom?
Islamic banks are generally set up in the form of joint stock companies with variable but often very high capital, underwritten by the majority of the founding members or by shareholders generally of Muslim religion and registered in a signed deed, called the Deed of Incorporation. The Islamic banking system has adopted the concept of participation in the financial risks of the company, according to the principle that those who make profits should be able to bear the losses. There are different types of investments whose profitability varies according to the risks generated, in order to meet the needs of the Muslim community regarding savings and investment needs. The Islamic bank offers two forms of investment: a) direct investment by which the bank is responsible for investing capital in projects that yield a dividend; b) investment by equity where the bank participates in the capital of a production company as both an investment and a management partner. In this specific case, the bank shares the risks with the customer by participating according to an agreed percentage in profits as well as losses.

What are the prospects for the development of Islamic finance in Mali?

Islamic financial institutions are classified into six (6) categories: Islamic banks; Islamic microfinance; Islamic Insurance (Takaful); Zakat Fund; Waqf Fund; Sukuk (Islamic ties).

The Islamic bank provides the same services as conventional banks. It is an intermediary between equity holders and borrowers. It deals with the collection of deposits (sight, term and savings) and uses them in banking operations (leasing, rental, Modaraba, etc.) and in other different operations, in compliance with Islamic law. However, to fully exploit the potential offered by Islamic finance, Mali and other African countries need to adapt their financial systems and their legal and regulatory structures to complement this important alternative mode of financing to finance national development plans and the national priorities contained in the national budgets in terms of sustainable development.

Directed by Harber MAIGA

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