Africa: IMF details plans to "unlock the promise of Islamic finance"
It said Islamic finance holds the promise to foster inclusive growth.The International Monetary Fund (IMF) is "keen to participate, to listen, to collaborate, innovate, and develop the promise of Islamic finance in a sound and sustainable way, by managing risks appropriately and ensuring financial stability," said IMF head Christine Lagarde at a conference on Islamic Finance in Kuwait on November 11th.
She said Islamic finance holds the promise to foster inclusive growth and support the livelihood and aspirations of the people in Africa and beyond, adding that risk-sharing features and the strong link of credit to collateral means that it is well-suited for small and medium-sized enterprises (SMEs).
However, she noted that despite these important benefits, there is still a "long way" to go to fulfil the maximum potential of Islamic finance, which represents less than one per cent of global financial assets.
She said one of the key elements required to unlock this potential is to create an enabling environment by adapting financial regulations to account for Islamic finance's risk-and-profit sharing model.
According to the IMF, the second priority for policymakers is to further develop the industry and markets. "For instance, information about the creditworthiness of SMEs needs to be strengthened, including collateral availability," said Christine Lagarde.
She added that the third priority for policymakers is to further strengthen regulation and supervision to ensure financial stability.
Total Islamic finance assets are estimated at around $2 trillion, practically a ten-fold increase from a decade ago, according to figures from the IMF.