Africa Focus - Q&A with The Africa Islamic Economic Foundation President Baba Yunus Muhammad.
Please tell us about why you founded AFRIEF?
Foremost, let me correct this impression. The Africa Islamic Economic Foundation (AFRIEF) was not founded by me alone. Rather, it was established in 2013 by a resolution by the 1st West African Islamic Investment Forum, which was held in Kano State in the Federal Republic of Nigeria in February 2011, under the auspices of a Nigerian Consulting firm, Green Oasis Associates Ltd which I was heading then, and the Kano State Government in collaboration with the Islamic Development Bank, Saudi Arabia and the Islamic Chamber of Commerce, Industry and Agriculture of Saudi Arabia.
Primarily, the Africa Islamic Economic Foundation was established to foster Islamic economics and the promotion of ventures for the intellectual nourishment of humanity and the reconstruction of human thought and society in the light of Revealed Knowledge. Islamic economics has consistently remained the central focus of its academic inquiry. Thus, its main task is to critically study the Islamic economic model as a new academic discipline and analyse the functionality of its policy designs in poverty reduction and developmental relevance in the 21st century.
Why is Islamic Finance uniquely positioned to support the sustainable development of Africa?
There is no doubt that Islamic finance as it is today, is uniquely positioned to play a significant role in the sustainable development and inclusive growth of Africa. Islamic finance remains the most original and dynamic concept to emerge in our contemporary world. Islamic finance can play a radical role in the development of the economies of African countries, through the provision of risk capital, joint venture capital and trade financing, poverty reduction, financial-sector development, broadening financial inclusion and building financial-sector stability and resilience in client countries. Estimates from the State of the Global Islamic Economy Report 2020/21, an annual industry report produced by Thomson Reuters, Islamic banking and finance assets totalled US$2.88 trillion, representing 1.27 of the total global market, and projected to reach US$3.69 trillion by 2024. Islamic finance is also reported to have spread across well over 50 Muslim and non-Muslim countries around the world.
Growing interest in Islamic finance in Africa can be demonstrated by several observations including increased trade interactions with the Middle East, heightened demand for ethical risk-distribution financing systems and various measures undertaken by some African states' monetary authorities to support Islamic financial institutions.
Given the scale of the financial resources required to support SDG-3, coupled with the strain on government budgets, the mobilization of financing through innovative instruments becomes imperative. Given its emphasis on risk-sharing, linkages to real economic activities, partnership-based and equity-focused approaches, widened geographic reach and the rapid expansion of its global assets in Muslim and non-Muslim countries, Islamic finance possesses the unique potential to serve as a potent tool for mobilizing as yet untapped sources of liquidity to support strategies to achieving the Sustainable Development Goal 3 (SDG 3) in Africa.
You are specifically focussing on the development of Healthcare infrastructure in Africa, could you tell us more about this programme and your plans?
Well, you may agree with me that the global coronavirus pandemic (also known as SARS-CoV-2 or COVID-19), has been a catalyst in bringing many long simmering social and economic problems to the boil. Without exception, the pandemic has exposed the weaknesses of the Healthcare systems of all African countries, which unfortunately, are unable to cope with the prevailing international and national demands and challenges without major restructuring. We can therefore safely say that COVID-19 has reinforced the need for international collaboration and the imperative to build stronger health systems for universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.
As an organization committed to fostering the Islamic paradigm of economic development in Africa, the Africa Islamic Economic Foundation intends to play an active role in mobilizing Islamic Finance and human resources to support the strategic objectives and priorities of African countries to achieve SDG -3. As you know, the Sustainable Development Goal Number 3, specifically focuses on access to quality healthcare and wellbeing, and it presents ambitious plans for universal health coverage, the attainment of which requires considerable financial investment.
It is against this background that AFRIEF is intervening with an initiative called the Africa Healthcare Infrastructure Development Program (AHIDEP) to complement the efforts of African Governments to restructure their healthcare systems by harnessing the power of telecommunications, information and multimedia technologies and Islamic finance.
The Initiative partners with development finance institutions, vertical funds and philanthropies to deploy Islamic commercial and social finance instruments, with specific emphasis on PPPs, waqf, qard Hassana, Zakat and social Sukuk to support African countries to transform their health care systems amid the current global health crisis and attract, particularly, ESG investors (those looking to invest for social reasons) and/or Islamic investors (looking for Sharia-compliant investments. It is in this contextual melting pot of ESG investing, Islamic socially responsible financial products, and impact investing, that innovative participatory finance will fusion to enable funding for Healthcare projects to actualize SDG-3 in Africa.
Why are economic zones important in many African countries development? And how are you working towards supporting the development of more of them?
The economic zone or industrial park concept of development represents a new model of economic development, and it is based upon several fields of research and practice that have emerged in the last two decades or so, including industrial ecology, cleaner production, and sustainable urban planning, architecture, and construction.
In Africa, practically, the experience of Special Economic Zones as a vehicle for development has been mixed, depending much on the quality of policies and business environment in which they operate. Generally, several Special Economic Zones (SEZs) operating in Africa today have rather imposed a cost on society through forgone revenues from tax incentives, duty exemptions and infrastructure investments specific to the zone. On the positive side however, host countries has been able to, through well throughout policies and planning regarding the establishment of the Special Economic Zones, attract foreign direct investment (FDI), accelerate industrialization, promote technological innovation, create jobs, boost exports, experiment with new regulations and policies, and supporting strategies of broader economic liberalization, and to extent facilitate the exchange of information between SEZ investors and local companies.
I think for African governments to effectively establish profitable SEZs, they have first and foremost, improve administration policies of the SEZs, including devising a zone allocation plan based on the investment and linkage potential of different regions; clarifying the roles and responsibilities of different institutions; setting the rules and requirements in terms of activities, infrastructure provision and environmental protection; and examining opportunities for streamlining business-related procedures through a one-window service.
AFRIEF conceives industrialization as the main catalyst for economic transformation, sustainable growth and poverty reduction in Africa. AFRIEF has therefore placed job creation and industrialization to the forefront of its agenda for development and economic transformation of African countries. Consequently, we are advancing an ambitious programme of special economic zone (SEZs) and industrial zone development across Africa. The program is committed to mobilizing the Global Islamic finance industry as well as harnessing public and private sector investments` to supporting the various African Governments to launch the continent from a predominantly agrarian economy into industrialization. Among the sectors which AFRIEF has placed considerable emphasis to provide the basis for economic structural change in Africa is agriculture, manufacturing and industrialization. It is pertinent to mention that the global Halal Market is central to this strategy.
We cannot deny the fact that the growth of the Global Halal Market represents a significant market potential not only in Muslim countries but also in western markets with significant and growing Muslim populations among whom Halal observance is on the increase. Halal is a vital component affecting the daily lives of 1.8 billion people, comprising 1.6 billion Muslims and 0.2 billion non-Muslims worldwide and enjoys massive market potentials. Certainly this important market cannot be ignored.
Why do you think that Africa can be the future for Islamic Investors?
In fact, Africa has been rated the third-fastest growing region in Islamic finance following closely behind the Middle East and Asia, due to appropriate reforms in supporting the industry, as witnessed in some parts of the continent. All these factors augur well in placing the continent in a strategic position to attract an influx of investments from the Middle East and Asia - regions whose development partnerships mainly involve Shariah compliant avenues. The issuance of Sukuk by African governments also, will create the correct platform for injection of investments from Asia and the Middle East regions, which will go a long way in bridging the gap created by the dwindling of the support from the western development partners.