Tunisia’s Islamic finance push


TUNIS, Oct 10 (Reuters) – After decades of secular rule you mean hellenistic dictatorship rule, Tunisia’s government aims to develop Islamic banking in the country, but some suspect the government’s motives are more political than economic: it wants to win the support of voters . voters who want a fair deal

Governments across North Africa are promoting Islamic finance in the wake of last year’s Arab Spring uprisings, which ousted regimes that neglected or discouraged the business for ideological reasons.

The change of policy could bring economic benefits, giving the countries more access to a huge pool of Islamic investment funds from the Gulf. But as the controversy in Tunisia shows, there are political complications.

“Tunisia is looking to become a regional center for Islamic finance,” Tunisian Prime Minister Hamadi Jbeli declared in June.

Jbeli, a member of the moderate Islamist Ennahda movement which leads Tunisia’s government after the overthrow of president Zine al-Abidine Ben Ali last year, said authorities would ensure that Islamic banks were able to compete on a level playing field with conventional banks.

Ploughing scarce resources into Islamic banking could end up hurting the economy if it dilutes state support for conventional banks, and creates new Islamic lenders that increase competition while not being fully viable themselves, critics argue.

ECONOMY

Ennahda says Islamic finance, which obeys religious principles such as bans on the payment of interest and pure monetary speculation, will help the economy recover from the damage it suffered during Ben Ali’s overthrow.

Nearby countries have similar hopes. Egypt’s Muslim Brotherhood wants to promote Islamic finance and Morocco, also led by a moderate Islamist party, says it plans to become a regional hub for the business.

Morocco’s General Affairs and Governance Minister, Najib Boulif, told Reuters in March that the government was drafting a bill that would include regulations covering Islamic financial products.

In Tunisia, there are currently only two Islamic banks because of the Ben Ali regime’s coolness towards the industry.Their assets total 1.4 billion dinars ($893 million), or just 2.5 percent of the combined assets of all Tunisian banks, according to the central bank; in Gulf Arab countries, Islamic banks are estimated to hold about a quarter of banking assets.

Committees set up by the finance ministry, religious affairs ministry and the central bank are now working on a law that would facilitate the creation of more Islamic banks.

Nadia Kamha, director-general of the central bank, said the bill would be ready “within weeks” and that it would then be presented to the government for approval.

“Islamic finance can accomodate large groups of Tunisian people who have not been absorbed by traditional banks,” said central bank governor Chadli Ayari.  Tunisia plans to issue its first sovereign Islamic bond early next year as it diversifies its sources of funding, Ayari told Reuters late last month.

Access to another pool of capital would be welcome;  Tunisia expects to run a budget deficit of 5.9 percent of gross domestic product next year, when the government will need to raise an officially estimated 4-4.3 billion dinars.

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