Islamic finance, a system rooted in Sharia law, has seen significant growth in West Africa, as its principles provide an alternative to conventional financial systems. This system, which avoids interest and promotes risk-sharing, has resonated with people globally and West Africa is increasingly embracing this finance model.
In recent years, there has been a surge in demand for Islamic banking and financial products. The future of Islamic finance in West Africa also appears bright, thanks to growing interest from consumers and investors. Now, as more people seek a more responsible and mindful lifestyle, interest in financial services that align with their ethical and religious beliefs is growing. Islamic finance can provide solutions to significant financial inclusion challenges in the region, offering access to affordable credit and facilitating investment in key sectors like infrastructure and agriculture.
Senior Manager at Amanie Advisors and an expert in Islamic finance, Abdulaziz Goni, agrees with the growth potential of Islamic finance, “Islamic finance in West Africa has significant growth potential due to the region’s large Muslim population and the increasing demand for Sharia-compliant financial products. There have also been some government initiatives aimed at further developing the sector. Countries like Nigeria, Senegal, and Côte d’Ivoire have introduced Islamic banking frameworks, issued Sukuk (Islamic bonds) and attracted investors from the Middle East and Asia.
He adds, “Financial inclusion is a key driver, as Islamic finance can provide ethical, interest-free banking to millions of unbanked individuals. The African Development Bank and Islamic Development Bank are also supporting infrastructure projects through Sharia-compliant financing.”
However, despite the interest and growth in Islamic Finance, numerous challenges must be addressed. Goni says, “Some of the more pressing challenges for Islamic finance in West Africa include limited expertise, regulatory gaps, and a lack of standardised frameworks. Many people, including potential customers and financial professionals, have limited knowledge of Sharia-compliant financial products, restricting market growth. Additionally, a shortage of skilled professionals who understand Islamic finance principles also makes it difficult to expand the sector.”
According to Goni regulatory challenges also hinder growth, as many countries lack clear policies or standardised guidelines for Islamic banking and finance. And the dominance of conventional banking limits access to Islamic financial services.
He shared how these challenges to the sector can be best addressed, “To overcome these challenges, governments and financial institutions should invest in awareness campaigns, educational programs, and training initiatives. Developing clear regulatory frameworks and ensuring harmonisation across countries can provide a stable foundation for growth. Encouraging partnerships with global Islamic financial institutions can help transfer expertise and attract investment, strengthening the sector’s long-term prospects.”
Islamic finance has emerged as an effective means of financing development worldwide, providing an ethical and socially responsible approach to economic growth. As West Africa continues to adopt Islamic finance, the region stands to gain from an innovative financial system that promotes fairness, inclusion and economic development and could ultimately lead to a more prosperous future.
The BRVM Investment Days hosted a compelling roundtable about enhancing UK-WAEMU cooperation for the development of Islamic Finance on 9 April in London.
