Islamic Finance Hoped to Boost Djibouti Infrastructure Projects

Ahmed Osman, governor of Djibouti’s Central Bank, is promoting Islamic Finance to increase government revenues and boost investment into internal infrastructure projects.

Without liquid assets, the government cannot invest in things like ports, railways and roads. It is felt that the banking sector suffers due to banks that contravene Islamic traditions around gambling and interest. A new banking law allowing Islamic finance passed in 2011 has increased bank use from 10% of the population to around 17% now. 90% of the population are Muslim.

With the new finance system coming into action, the country hopes to boost the economy through building railways, ports, roads and airports. The country’s Doraleh Container Port was built using Islamic finance from the Jeddah based Islamic Investment Bank.

With the introduction of Islamic finance into the country, more revenues are coming “through the books” and less through the informal economy. This increases revenues available to the government. At present, 48% of the labour force are reckoned to be unemployed, and 42% of the 900, 000 population live in extreme poverty according to the IMF.

Since 2011, Islamic banks have grown to 15% of the banking sector in the country, with investors from Somalia, Egypt, Yemen and the UAE.